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Could Dollar General become a go-to healthcare resource in rural America?
Dollar General plans to increase its selection of healthcare products and services across the communities it serves in rural America, making the chain more valuable to the locals in areas that have been traditionally underserved.
The retailer intends to establish itself as a destination point for customers in need of cough and cold remedies and dental and feminine hygiene products. Dollar General will also offer a selection of other health aids and nutritional and medical items.
The move, according to the retailer, is a logical step in its expansion strategy that has put one of its stores within five miles of three-quarters of the U.S. population.
“We are always looking for new ways to serve, and our customers have told us that they would like to see increased access to affordable healthcare products and services in their communities,” Todd Vasos, Dollar General CEO, said in a statement. “Our goal is to build and enhance affordable healthcare offerings for our customers.”
Dollar General has made significant customer acquisition gains across rural America since the novel coronavirus pandemic hit last year. The dollar store chain has expanded its selection of consumable and non-consumable goods during that time. Doing so has resulted in customer retention rates and net promoter scores as good as the retailer has ever produced, Mr. Vasos said in May on the chain’s first-quarter earnings call.
The retailer said in a related announcement that it had hired Albert Wu, M.D. to the newly created position of chief medical officer. Dr. Wu is expected to help develop new health care services to be offered by Dollar General and to work with “healthcare product and service providers to build a comprehensive network of affordable services” for the retailer’s customers. The company did not offer specifics on the types of services it might bring to market.
Dollar General’s new chief doctor joins the chain after working at McKinsey & Company since 2016. Dr. Wu led a team at McKinsey working on a variety of projects, including those dealing with improving healthcare for rural patients.
Mr. Vasos said Dr. Wu will bring “a unique perspective” to Dollar General as it moves into healthcare products and services for its customers.
- Dollar General Announces Plans to Increase Access to Health Care Products & Services, Expanding Health Offerings in Rural Communities Across America – Dollar General Corporation
- Dollar General Corporation (DG) Q1 2021 Earnings Call Transcript – The Motley Fool
- Is now a good time for retailers to open new stores? – RetailWire
- Will dollar stores be the biggest post-COVID-19 winners? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: How challenging will it be for Dollar General to move into healthcare product categories and services in rural markets? What types of services do you think Dollar General should pursue to serve the healthcare needs of consumers in rural areas and what hurdles might it face in doing so?
Poll
Loading …BrainTrust
Jennifer Bartashus
Senior Analyst, Bloomberg Intelligence
Gary Sankary
Retail Industry Strategy, Esri
The healthcare industry is worth north of $8 trillion dollars and it makes great sense for Dollar General to expand into this space. With over 17,000 locations their market coverage, especially in rural/under-served markets make this a very compelling strategy. There are many potential services that Dollar General could offer, and no doubt they can learn from some of the early experiments that Walmart (and others) have conducted. The biggest hurdle will be the same hurdle that rural communities face today — attracting physicians to small towns. That said, changing views on lifestyles from the pandemic and the financial capabilities of Dollar General could make this more attractive than it once was. Overall, I love this strategy.
Dollar General has a reach into rural America that is unlike that of any other retailer – even Walmart. Indeed, its convenience is an often overlooked reason that, beyond price, allows it to do so well. Placing more emphasis on healthcare products will serve it well and will deepen the share of revenue it can attain from customers. I am curious as to what healthcare services will be offered. The staffing structure and size of most Dollar General stores, plus the positioning of the retailer, don’t lend themselves to a service based proposition in healthcare.
With 75 percent of the U.S. population within 5 miles of a Dollar General, its reach makes it convenient for many consumers. Increasing the assortment of health and wellness products such as cold remedies, dental, feminine hygiene and nutritional items should be easy to execute for Dollar General and will make their stores a convenient and valuable option for these products. However expanding into health services will be more difficult. Bringing health products and services closer to more people is a great strategy.
COVID-19 taught many businesses many things. In this case, it may have made the dollar stores aware that, by their location in rural areas, they have an opportunity to not only serve their communities better by providing a modicum of health products and services, but to increase revenues in the process. Worth testing the concept.
I’d love to see the research that says that this is a market opportunity for Dollar General, since there’s a Walgreens or CVS in practically every town in America. Personally I’d rather buy name-brand medications than a $1 version produced for Dollar General.
That was my first thought as well. What about those Walmart stores? I don’t pretend to understand the motivation behind Dollar General shoppers (I just read some data recently that showed dollar stores are more expensive on a per-unit basis than other retailers, I don’t see why a shopper would do this.)
Move to Alexander, NC or Del Rio, TN. Then you will understand.
While there are a lot of Walgreens, CVS and Walmart stores they are far from being found in every town in America. In the rural hinterlands of Vermont and New Hampshire, for example, there are small towns where Dollar General plus an independent market and a post office are the only options. Sure, there’s usually a national drugstore or a Walmart that’s 15/20 minutes away – but that’s the point: who wants to drive that distance for a distress purchase where you’re buying one ingredient you’ve run out of, a lightbulb that urgently needs replacing, or a packet of headache tablets, etc.? As well as catering to low income shoppers, that’s why Dollar General does well among other higher income groups. It’s super convenient.
Again I think it needs to be clarified here that Dollar General is not limited to a $1 price point. They do have an aisle of $1 items (no different from many Walgreens locations and various grocers) but 95% of their store is at various price points with the same packages, brands, and package sizes sold at Walmart, Target, and other grocers.
As far as paying more per unit for product, Dollar General’s everyday pricing tends to be very close to Walmart’s pricing for most household-type items (this would include OTC Drug items) and grocery items. Very close as in within 5-10 cents on many of the under $3 type items, or within 50 cents on larger value items (like a $10 bottle of Tide).
I think the data you are referring to with price per unit may be looking at per unit prices at stores like Dollar Tree who are limited to the $1 price point and have special smaller size products. I agree, those stores are often a poor value.
I think it needs to be clarified here — Dollar General already has numerous SKUs of OTC Drug including brand name items as well as limited private label items. Dollar General is not limited to the $1 price point or limited to any price point.
Not without its share of challenges (e.g., staffing, store size, merchandising standards), Dollar General has several distinct advantages (location, reach, size, logistics, and foot traffic).
Could they become a healthcare resource in rural America? Yes!
Do they need to create carefully-curated assortments? Yes!
Will they need to enter partnerships to make this successful? Absolutely!
This seems like a natural extension of other initiatives Dollar General has, such as expanding its fresh produce offering to more of its stores. An expansion of healthcare products being sold could resonate with its shoppers, and offers opportunity for branded and private-label items. An extension beyond that into services might be much more complicated and seems less realistic, both from a space perspective (part of the chain’s success is its smaller store size) as well as staffing.
Yes, yes, yes. But they are DOLLAR GENERAL! At this point in time, you’d have to be pretty desperate to go to a DG for medical care. Curate the product assortment – there’s a good idea, especially if you are the only store in town. But medical services? Not sure this flies, even though the areas could be underserved. Are they so underserved that this makes sense?
Pervasive rural reach will help Dollar General make healthcare affordable and accessible to all Americans. Consumers will appreciate Dollar General’s expansion into convenient, local healthcare options.
Adding economical healthcare clinics and health and dental insurance could keep Dollar General competitive against rival dollar chains and Walmart.
I wonder if they will limit their scope to humans or extend it to pets.
I agree, Venky. I think there’s a huge opportunity in pet and vet services.
Right Raj — there are 135 million pets (and that’s only cats and dogs) in the US. That’s much more than 75M children aged 0-17.
Dollar General focuses on underserved rural America. The chain has pursued growth opportunities by adding more categories their customers value into existing stores. Earlier this year, the company announced a store modernization strategy and began rolling out a fresh grocery program.
The move into affordable healthcare products and services reinforces their intent to become a one-stop shop. Dollar General is addressing the negative impact of the ongoing rural pharmacy deserts. With more than 17,000 stores, Dollar General has a lot of goodwill in rural areas, which will only increase with this latest strategy.
Mohamed, you put your finger on it. DG is well placed to provide very modest additional categories in pharmacy deserts. Period. Not services, not expensive products (and most prescription AND nonprescription medical items ARE expensive, not prescriptions.
In short, this is an extremely modest initiative, basically adding categories that DG probably should have added years ago. No threat to Walmart, CVS or anyone else.
Thanks, Robin, for weighing in. Services are a definite stretch. By the way, I have your book, “Behemoth,” on my reading list!
Similar to the other views in this discussion, I agree that this is a really smart consideration by Dollar General. They are a trusted brand with locations that few can match. Whether they have physical staff in stores or engage in some type of telemedicine via their app or through other means and pair it with local fulfillment, I am excited to see how this pans out.
Like anything worthwhile there will be hurdles. Building equity and trust in this area, figuring our how rural areas engage with healthcare, staffing for these locations, likely low digital engagement among the general cohort. However they are able to test and learn so efficiently and, with an experienced leader at the top, it could turn into something remarkable.
I had to laugh (in agreement) when reading Venky’s comment as I’ve often wondered when they’d get into pet more aggressively. I think there is a huge opportunity for them to service pet needs via pet health care/mini vet clinics.
Kudos to DG for their continued thoughtful and disciplined approach to retail.
If Walgreens and CVS can sell food, Dollar General can sell HBA and consumer friendly healthcare.
Never underestimate Dollar General. The king of dollar stores has methodically spread its wings over the years even as it has flown under the radar. Dollar General continues to kill with convenience by running contrary to industry norms (tens of thousands of brick-and-mortar locations). It’s only logical that Dollar General would leverage its locations to bring healthcare products and services to its otherwise underserved customers. I’ll say it again, business model diversification is the growth driver of retail’s future. Health and wellness is emerging as a top vehicle.
The other industry norm they defy is on store standards. Their stores are, frankly, usually a mess. Shelves are not stocked, freight all over, only one or two employees on duty at a time. Dollar General serves a need and is an effective merchandising organization, but a lot of corners are cut in the process. You can get away with that when you are the only choice.
I applaud this strategy, it has the potential to address a dramatic disparity in the delivery of health services between urban and rural populations. I do however have to wonder how they can scale this service. A lot of the issue in rural parts of America is the lack of trained professionals to deliver that care. This is why so many rural states have programs to exchange medical school costs for service in rural clinics for a given amount of time. I’m not sure how Dollar General will be able to solve this issue. Getting product out to their rural stores, not an issue. Finding doctors, nurse practitioners, pharmacists and health professionals to staff these locations, that will be a very significant challenge.
“Yes,” and not just in rural areas. Many uninsured and under-insured patients-as-health-consumers are desperate to access lower-cost healthcare products and services, and DG is trusted among certain demographics in the U.S. Their COVID-19 testing pilot in the State of Virginia will help them figure out their taste and muscles for healthcare services. Here’s what I wrote about this today in the Health Populi blog for more views on the question.
Yes! Location, location, location, is a key component of success at retail, especially in the underserved sectors which Dollar General services. Add vaccinations (Covid-19, Cold and Flu, etc.) to this and Dollar General becomes a key go-to player for government funding to reach underserved communities!
The “product” part I’ve no issue with: assuming expiration dates are adhered to, one box is pretty much like another box … right?
The “services” part raises my brow: they usually require some level of infrastructure — and people — something to which “dollar store” seems almost an antonym.
Simple answer, yes.
Why? Location, location, location. Dollar General has 16,000+ stores scattered throughout the rural US. Many of their customers and stores are far from a Walgreens, CVS, or Walmart, let alone a Target, Urgent Care, or Emergency Room. Drive most two-lane highways in the US and you’re bound to come upon a Dollar General.
Other benefits? Serving a very under served population that needs better medical advice and care and would see an increase in quality of life and decrease in overall cost impact to society.
Challenges? Many! The right merchandise is one thing, but having the right “services” will require additional expertise and/or automation that would help deliver those services consistently in a highly distributed environment. Maybe an opportunity to run a dedicated video-based medical service leveraging the in-store network.
New idea? Broadband internet guest access for those in-store or in the parking lot, a la Tractor Supply.
They have already done a significant expansion on SKUs in the drug category now vs. say, five years ago. They have a solid 4-5 aisles including an entire wall of SKUs of drug OTC, shampoo, cosmetics, etc. in their stores They are light on vitamins but I think that is because they want to focus on high turning SKUs and vitamins are not going to be high turning in these locations. The mix in drug overall is comparable to what most grocery stores offer but at lower price points. Their private label isn’t as well developed on drug as the grocers/drug store chains so their mix skews further toward branded items.
Those posting who imply that this is a category expansion of some sort have obviously not been to a Dollar General.
To go further into healthcare “services” they will need to make some very serious investments in store cleanliness, staffing, and overall maintenance.
I can think of 10 2k population “towns” within 3 hours of me that have a Dollar General and it is a 45 minute to 1 hour drive to get to the nearest CVS or Walgreens (which in the case of Walgreens, don’t really show up until you get into a place that has a Walmart). Rite Aid has a little better reach into some of these rural areas.
Dollar General and the other extreme value retailers were once perceived by Walmart and the ilk as “ankle biters.” Now they are legitimate retailers, who recognize that some people need to save money, but everyone likes to save money.
The key question for Dollar General is, what problems does the DG target market give it permission to solve? Or in other words, what products and/or services fit under DG’s umbrella? Healthcare appears to be a natural. What’s next?
This is encouraging to see: Dollar General doing what they do best, serving the under served community. Often, the Dollar General is the only local store in some rural communities. These communities need a lot more than just quick bites and beverages. Bringing even basic health and hygiene products (beyond the typically crude buy-if-you’re-desperate assortment) would be welcome. Going a step further to offer affordable access to onsite nurse or PA could make this store of the community a pillar of the community.