Walmart better watch out for Dollar General.
In an economy where many stores are struggling, Dollar General is cashing in on younger shoppers. Millennials – customers around ages 18 to 34 – are spending their dollars at Dollar General, according to Fortune.com.
How much are the spending much? About $1.26 billion or 24 percent of sales last quarter, to be exact. The numbers are even more impressive since millennials only account for about 12 percent of all sales. In other words, they’re spending roughly twice as much as shoppers in other age brackets, and it shows no signs of slowing down. Dollar General is set to open 900 new stores in 2016, followed by 1,000 more in 2017, Fortune.com reported. After 2017, Dollar General will have about 15,000 locations.
The convenience of the smaller stores is believed to be one reason. Shoppers usually have to drive a shorter distance to get to a Dollar General. Then, there’s not a lot of walking to find the items they need. Dollar General’s stores are typically 7,400-square feet, compared to the typical Walmart Super Center, which can be as large as 260,000 square feet.
What’s inside a Dollar General that gives it appeal for younger customers? Like Walmart, prices are low, and stores are increasing the variety of food items, including more choices for healthier foods, according to Fortune.com.
Dollar General recently added 23,000 coolers in 9,000 stores to offer a bigger variety of food items. Some stores are now selling fresh fruits and vegetables. In an effort to keep shoppers and promote more-popular healthy eating habits, many Walmarts are updating their fruit and vegetable sections.
In an interview with SeekingAlpha.com, Dollar General CEO Todd Vasos told analysts about the store’s profile for a younger customer.
“She wants healthy food items, and likes to be on the cutting edge and try new products,” he said. “These insights will help us serve her even better going forward as we strive to ensure she becomes an even larger consumer segment for us over time.”
Other efforts to attract and keep younger shoppers include a healthier food line, Heartland Harvestand, more beauty care items, and an updated smartphone app.
Dollar General’s momentum started back when the recession began. It’s believed that the store capitalized on shoppers looking to save money on gasoline, when back when gas prices were higher.
Dollar Tree, Family Dollar and Dollar General have also been renovating stores to update their appearance and make them more inviting.
It seems to be working.
Dollar stores’ profits are inching higher, as bigger retailers are losing money. Dollar General plans in increase annual sales by seven percent to 10 percent.
Dollar General’s sales increased 2.2 percent last quarter. One of its main competitors, Dollar Tree, saw sales increase 2.3 percent. Meanwhile, Walmart’s increased 1 percent and Target saw a sales increase of 1.2 percent.
But it doesn’t look like Walmart is going to hang it up anytime soon.
Interestingly, Forbes.com found that millennials do shop at Walmart. But it’s not necessarily out of a loyalty or intense love of the brand.
“They don’t necessarily shop Walmart because they want to; this cash-strapped, financially conservative group does so because they have to,” Forbes.com reported.
A study by Net Promoter® Scores found that Walmart scored less than the benchmark 80 percent in merchandise groupings. And millennials ranked Target higher than Walmart in 24 out of 25 categories, Forbes.com reported.
In February, Walmart had its first annual sales decline in more than 35 years, according to FinancialTimes.com. Competition from Amazon and changes in how shoppers shop was blamed, in part, for the decline. Other factors were the deceleration in markets in the United Kingdom, China, and Brazil.
[Photo by Jill Sullivan/Getty Images]