In New Challenge to Walmart, Dollar General Is Winning Over Millennials

May 27, 2016, 3:31 PM UTC
A Dollar General Corp. Store Ahead Of Earnings Figures
Shopping carts sit outside a Dollar General Corp. store in Princeton, Illinois, U.S., on Wednesday, March 11, 2015. Dollar General Corp. is scheduled to release earnings on March 12. Photographer: Daniel Acker/Bloomberg via Getty Images
Photograph by Daniel Acker — Bloomberg/Getty Images

Millennial shoppers may be increasingly scarce at shopping malls, but they are turning up at dollar stores.

Dollar General (DG), the largest such U.S. discount chain with 12,700 stores, said this week that young adult shoppers now account for 24% of its sales. That amounted to $1.26 billion last quarter, as total revenue rose 7%.

In even more promising news for the retailer, millennials accounted for only 12% of Dollar General’s shoppers. So, customers in that age group were spending about twice as much as the average Dollar General patron.

It’s logical that millennials would start to gravitate to dollar stores as they enter their family-founding years and need to save money. But Dollar General’s progress should be worrisome for the likes of Walmart (WMT) and Target (TGT) as they redouble their own efforts to win younger shoppers and replenish their customer bases.

Dollar General’s comparable sales rose 2.2% last quarter, compared to 1% at Walmart and 1.2% at Target. (Arch-rival Dollar Tree (DLTR) reported a 2.3% gain.)

The dollar store chain put a big dent into Walmart’s business in particular in the immediate post-recession period. During that time, Dollar General expanded its fleet aggressively and attracted customers looking to cut down on longer drives when gas prices were high.



But coming out of the recession, Dollar General, along with Dollar Tree and Family Dollar, have sought to improve the look of its stores and the calibre of its food to keep the pressure on.

Dollar General has added 23,000 coolers at 9,000 of its stores to expand its grocery assortment. At about 160 Dollar General Plus stores, where the retailer goes for a higher-end presentation, it is testing a small assortment of the best-selling fresh fruits and vegetables.

This has put Dollar General on a collision course with Walmart, which is investing heavily in upgrading its fresh food selection and is looking to avoid losing shoppers making smaller grocery runs.

“She wants healthy food items, and likes to be on the cutting edge and try new products,” Dollar General CEO Todd Vasos told analysts on Thursday, referring to the typical young customer.

In the first quarter, Dollar General launched a new health-focused private brand line named Heartland Harvest, as part of its campaign to win over millennials. The retailer is also expanding its house brand offerings in beauty care and ramping up its smartphone app.

“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,” Vasos said.