Dollar General is betting on the continuing decline of the middle class
Quick: Who made more money in their most recent fiscal year — Dollar General or Macy’s? And whose market value is higher — Kroger’s (with five times the revenue) or Dollar General’s? According to a Wall Street Journal article, Dollar General wins on both.
Business Insider states, “Dollar stores’ sales grow as more Americans struggle economically, with retailers betting on a ‘permanent underclass in America.’”
Retailers have long known that the middle is no place to be, but now it seems the low-end of the market may be as big an opportunity as the high-end.
Dollar General’s CEO, Todd Vasos, told the WSJ that “the economy is continuing to create more of our core customer,” which is households making less than $40,000 per year.
According to Business Insider, dollar store sales grew from $30.4 billion in 2010 to $45.3 billion in 2015. Analysts think that with the imminent passage of a tax bill said to bring more benefit to corporations and the rich, the trend will continue. Cushman & Wakefield analyst Garrick Brown told Bloomberg that “what the dollar stores are betting on … is that we are going to have a permanent underclass in America.”
The middle class shrunk in 203 of 229 metropolitan areas from 2000 to 2014, according to Business Insider. The average income of the top 20 percent of Americans grew by 60 percent from 1980 to 2015, while income of the poorest 20 percent grew just 10 percent, citing Pew Research.
As Tony Orlando, owner of Tony O’s Supermarket and Catering and BrainTrust panelist, put it in a recent discussion on independent retailer success, “it still comes down to the economic circumstances of the community you are in. Our area has lost over 25,000 jobs in the past 30 years, and what we have left are poor retired folks and a lot of government assisted families.”
- How Dollar General Became Rural America’s Store of Choice – Wall Street Journal
- The Dollar General CEO just accidentally made clear how screwed up the economy is – Vox
- Dollar stores are dominating retail by betting on the death of the American middle class – Business Insider
- Dollar General Hits a Gold Mine in Rural America – Bloomberg
- Indie Retailers can survive and even thrive during the holidays – RetailWire
- Dollar General Surge gets the attention of The Wall Street Journal – Nashville Business Journal
- Dollar General gains by targeting small towns, as in Western Pa. – Trib Live
DISCUSSION QUESTIONS: Should more retailers start to target America’s poorest consumers given the uneven progression of economic recovery? How might more mainstream retailers reposition themselves to cater to lower-income households?