Vasos said same-store sales increases are three times higher in stores with fresh produce than those that don’t offer it.
The fast-moving consumer goods chain began testing produce sales earlier this year. While Vasos said the expansion into produce will be cautious, he notes that eventually up to 5,000 locations could offer produce.
While recent grocery store news has focused on competition among the larger grocery chains and new entrants in the field, Dollar General has stayed more under the radar, quietly but steadily growing. In the last five years, it has increased its number of stores by 35%, with locations in 44 states.
Its winning formula is simple; build locations in rural areas where larger-sized stores don’t venture. Dollar General’s target shoppers earn $40,000 or less, and appreciate having stores in convenient locations — especially when they live far from metropolitan areas. Shoppers also appreciate the smaller packaging of items on the shelves — and the correspondingly smaller price tag that allows them to pick up items as needed without having to overbuy.
As the chain started adding fresh produce, Vasos touted its net impact, which allows the discount store to elbow in on traditional and independent groceries, as well as Walmart. Adding fresh produce makes a dollar store more of a destination for shoppers than a convenient fill-in between trips to larger stores.
But are these expansion plans too ambitious? The move to sell produce matches shifts in consumer behavior for healthier, more natural food. And the market for fast-moving consumer goods is strong. According to research firm GlobalData Retail, sales at dollar stores increased 50% from 2010 to 2015 to $30 billion — a clip much higher than retail’s 17% growth during that same time. Food manufacturers are noticing this growth as well, and are offering dollar-sized packages, brand-name merchandise and even exclusive products to that category of stores.
But will demographic shifts impact Dollar General’s rural base? While aging residents may be staying put, younger people are moving to cities. According to the Census Bureau's American Community Survey, just 19% of Americans are still living in rural areas.
Dollar General has been experimenting with other format changes to serve a younger, more urban population. This year, it opened its first DGX stores, which target millennial shoppers. While these stores — the most recent of which began operating in Philadelphia last month — concentrate on grab-and-go essentials, they may be a good place to also start adding fresh produce, targeting a core group of shoppers who increasingly look to dollar stores.