Dollar General has a strong understanding of the economic forces that impact its customers. The company has overtaken the competition by recognizing that the large income gap in the United States leaves a significant number of locations untouched by rival stores. As such, Dollar General’s business model focuses on selling small-ticket items to a target market of low-income consumers on tight budgets. Many stores are not able to justify entering into a low-income market with a customer base that has low buying power and largely relies on government assistance to buy necessities. However, understanding this market is where Dollar General found its niche.

Larger chain stores—such as Walmart or Whole Foods— along with smaller local stores find it difficult to sustain operations in these markets. Even low-cost retailer Walmart faces a start-up cost of $15 million when creating a new Supercenter, in contrast with the $250,000 that Dollar General spends on a new store. Dollar General makes good use of its shelving space, fitting a variety of different products within a space one-tenth the size of a Walmart store. This large assortment of products helps offset the setbacks in customer service some Dollar General stores experience as it keeps costs low by hiring fewer workers. 

Questions for Discussion

1. Describe how Dollar General monitors and responds to its competition

2. What overall impact do you think the U.S. Food and Drug Administration’s pilot program will have on Dollar General

3. How should Dollar General change its marketing strategies to cope with increasing competition from larger retailers like Walmart