Will Dollar General’s DGX concept be a hit with urban Millennials?

Discussion
Photo: Dollar General
Dec 10, 2018
Matthew Stern

A big dollar store chain that’s been described as “taking over rural America” is now upping its urban presence with a new store concept tailored specifically to the city.

Dollar General is expanding its test of a small store concept under the banner, DGX, a Millennial-focused concept half the size of a traditional 9,000 square-foot Dollar General, according to Bloomberg. DGX features a familiar dollar store assortment with a low-price focus and free Wi-Fi. There are currently three DGX locations nationwide, the most recent one having recently opened in Philadelphia. Others may be coming soon as part of Dollar General’s rapid planned 13,000 store expansion, which will almost double its number of existing stores.

City-dwelling Millennials continue to be a good demographic for dollar stores to court given the generation’s characteristic deal-mindedness. A recently released paper by the Federal Reserve confirms that Millennials earn less and are faced with higher costs than previous generations, as reported by CNBC.  

As it tries to woo the Millennial consumer, Dollar General has begun to pilot some additional store enhancements in its main-line locations that are unique in the world of dollar stores. For instance, it recently announced that it was piloting its DG Go! app, the first scan and go system in the dollar store space. In addition to speeding along the checkout process, the app automatically applies coupons and alerts customers to deals.

As it moves into urban markets with DGX, Dollar General will find itself up against a chain it has some history with.

In 2014, Family Dollar rejected a merger offer from Dollar General based on the perceived antitrust risk. But the following year, competitor chain Dollar Tree undertook a merger with Family Dollar.

Now may be an advantageous time for Dollar General to enter the market against the chain it was once courting — especially with a better, more customer-focused and well-maintained store experience.  

All has not been well for the combined Dollar Tree/Family Dollar since the merger, however. The Wall Street Journal reported early in November that Family Dollar is dragging down Dollar Tree’s overall financials.

DISCUSSION QUESTIONS: What will DGX have to do to compete in urban markets that already have a significant presence from chains like Family Dollar? Will starting out with small concepts tailored to Millennials offer a significant advantage for the chain, and what can other retailers learn from that?

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Braintrust
"DGX will need to study what the urban shopper wants and buys."
"...there are thousands of underserved communities that would welcome this new brand, including urban food deserts..."
"Saving money is a draw, but going to several stores to fill the pantry can be an inconvenience, especially in an urban setting..."

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22 Comments on "Will Dollar General’s DGX concept be a hit with urban Millennials?"


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Mark Ryski
BrainTrust

Creating a new urban concept tailored to Millennials seems like a smart move by Dollar General. The key to success will be creating and executing a new concept that truly is unique – from product mix to checkout experience. It won’t be good enough to merely create the appearance of something different if the shopping experience is essentially the same as a typical Dollar General store — DGX really needs to offer something different. Cosmetic or merely “marketing” changes can be easily replicated by competitors.

Phil Chang
BrainTrust

It’s good to be focused on the consumer and thinking about how to fix consumer pain points. Lining up at these stores has always been a complaint so I’m glad to see Dollar General trying to fix this.

Why don’t I think this will work? Bodegas have a special place because, well, they’re special. Millennials look for deals but also want experience. A half-size store with good checkout service is unremarkable at best.

Dollar General clearly has the data — do more with it!

Cathy Hotka
BrainTrust

I’m not sure what a “Millennial-focused concept” means (please, not avocado toast) but there are thousands of underserved communities that would welcome this new brand, including urban food deserts where there’s a liquor store on every other corner. Question: will there be parking?

Patricia Vekich Waldron
BrainTrust

I was wondering the same thing, Cathy — why just Millennials? Urban dwellers of all shapes and sizes would welcome a curated selection of food and household goods!

Evan Snively
BrainTrust

Success or failure for DGX stores will hinge upon smart real estate choices. Places where DGX can play an active role in improving the stability and growth of urban areas that are turning the corner — things that align with what Millennials are looking to do when they move in as well — will certainly help its chances to succeed within the community.

Brandon Rael
BrainTrust

The Dollar General brand is not a well-known commodity in cosmopolitan cities and with Millennials. However this the DGX brand extension, with this customer-obsessed smaller scaled stores, mobile apps, and with the right value proposition may just start to attract new customers. But a smaller concept store isn’t always the solutions retailers believe it could be.

It has to be a unique combination of the right experience, assortments, pricing, promotions and efficiency for DGX to compete in a sea of smaller concept stores; CVS, Walgreens, Amazon Go, etc. that has already emerged in big cities such as New York, Chicago, Boston, etc. Let’s not forget the well-established neighborhood bodegas that are open 24/7 in NYC.

The challenge for Dollar General is to find a way to connect with the city professionals on the go. Why do you deserve the Millennials’ business, and what makes you unique?

Sid K. Hasan
Guest

YES.

Have a look at what Five Below has done to the market. I see this trend building up and out.

Data suggests this model is here to stay.

David Weinand
BrainTrust

Judging by the picture, the new stores are definitely more appealing from the exterior – of course, they’ll have to carry that more modern look into the store and through their merchandising and product mix. A lot can be said for creating more visually appealing stores in and out (e.g. Target vs. Walmart) so I see this as a good strategy for Dollar General. Incorporating technology will also help in appealing to the digitally native cohort.

Anne Howe
BrainTrust

DGX will need to study what the urban shopper wants and buys. My guess is they’ll need strong data and insights on a market level to produce a product and experience that will resonate and inspire buying behavior amongst a shopper target that’s quite different from the shoppers they currently serve.

Richard J. George, Ph.D.
BrainTrust

A bold but logical move by Dollar General. Especially since the Family Dollar/Dollar Tree (FD/DT) merger has caused financial and other issues within the merged companies. Frederick the Great once said, “Do not attack the enemy when he adheres to the rules, but profit from his slightest mistakes without delay.” While FD/DT attempts to sort out its issues, the DGX concept benefits from an unfettered competitive response with its latest experiment.

Ricardo Belmar
BrainTrust

This will really depend on three factors — location, product mix, and experience. A scan and go mobile app is a good start, and while the exterior looks visually appealing, Dollar General needs to think carefully about the interior visual appeal, overall shopping experience, and product mix. It will take more than value pricing to earn new Millennial customers in urban environments where there are so many other options serving those same needs.

Neil Saunders
BrainTrust

While Dollar General still has a lot of headroom for growth in rural markets, pushing into urban territory gives it another vector for expansion. The concept should work as the core principle of low-prices will be attractive to urban shoppers, just as they are to rural ones. That said, urban shoppers have a lot more choice than rural ones (where Dollar General can be the only game in town) so adding more bells and whistles like the scan and go app will be useful in differentiating.

Seth Nagle
BrainTrust

When it comes to competing in urban markets nothing is more important than location. With that in mind and this being a store concept focused around Millennials I hope they get a little creative with their marketing and partnerships and tap into ridesharing and the scooter fad to get new shoppers through the door.

Once in, it’s all about the shopping experience. if DGX can create an enjoyable one and provide unique category assortment options then they should be able to compete with Family Dollar.

Ken Morris
BrainTrust

Rebranding the smaller footprint Dollar General stores to a hipper brand, DGX, will help attract urban Millennials. Customizing the assortments to each local market will also be key to DGX’s success as, with less space, product assortment will be more critical.

Infusing mobile apps and adding customer Wi-Fi — that makes shopping easier and faster is also a smart move. Dollar General appears to be listening to what its customers want and adapting.

Sterling Hawkins
BrainTrust

It will come down to design and experience. Millennials have just about unlimited retail choices from Amazon to Postmates delivery. Where it will matter is if DGX can create an experience (with technology being a piece of it) that speaks to the target consumer. I think Dollar General will be challenged to create that given their legacy culture. And it can be done with the right thinking from the right people.

Jasmine Glasheen
Staff

Dollar Store shoppers generally aren’t looking for a chill place to plug into WiFi and work. Since Millennial shoppers often seek price and experience from two different types of retailers – think Amazon for price and Apple for experience – there might be a disconnect between what customers are looking for from a discount retailer and what DGX is trying to provide.

Cate Trotter
BrainTrust

It’s not a new idea, but it makes sense and I’m sure one that will appeal to more shoppers than just Millennials. What I’m most intrigued about is the addition of free Wi-FI. It doesn’t seem like a must have for a store like this — how long do people really spend inside? However with Dollar General trialling scan and go tech, it makes more sense. It might also be a deliberate counter to idea of looking up a product online for cheaper prices while in a store. If Dollar General is confident that it’s the best deal out there, it’s going to want people to check and see that.

Steve Montgomery
BrainTrust

There is no question the impact Dollar General has had in the rural market place. It has developed locations that have access to its targeted demographic and developed a format and product mix to meet their needs.

As it enters the urban markets, the DGX concept the must do the same. The question this raises is, will it find more success in areas that the article indicates, i.e. those populated by urban Millennials or in locations in the many food desserts that exist in these markets? Dollar General may find that a two-brand approach will work best to penetrate the urban markets. Larger Dollar General branded locations to serve the food dessert and DGX for the Urban Millennials.

Joan Treistman
BrainTrust

One challenge for urban DGX is having enough assortment to promise a visit to DGX will provide better value without the need to go from store to store for to achieve a similar value. I am focused on the consumer’s shopping cart content. Saving money is a draw, but going to several stores to fill the pantry can be an inconvenience, especially in an urban setting, that savings won’t overcome.

Matthew McAlister
Guest

Some will see this as a branding and merchandising challenge. To an extent, that’s the case. But the real battle will happen on the real estate front. For city dwellers, millennial or not, convenience is king. To earn my traffic, the new DGX store has to be as close to customers as their existing options (mom and pop dollar stores, pharmacies, bodegas) or have an experience that’s amazing enough to convince me to go a block out of my way. Location, location, location.

John McIndoe
BrainTrust

With smaller footprint stores, DGX will have to remain acutely focused on optimizing assortments and store layouts. “Optimizing” doesn’t necessarily mean stocking only high-margin products, but analyzing different shopper cohorts’ baskets. If a shopper has to make an extra trip to another store because DGX doesn’t carry his favorite detergent brand, that shopper might very well go elsewhere. And, DGX must remember that two stores close to each other may serve very different shoppers. They will need to organize store clusters based on similarity of shoppers’ needs, not geographic proximity. These are tall orders, but are two of the secrets to success.

Min-Jee Hwang
Guest

Why just Millennials? The buzzwordy-focus on “Millennials” is shaping up to be more of a distraction than a benefit. Retailers should instead worry about the customer experience overall. The benefits of the DGX concept appeal to more demographics than just Millennials.

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Braintrust
"DGX will need to study what the urban shopper wants and buys."
"...there are thousands of underserved communities that would welcome this new brand, including urban food deserts..."
"Saving money is a draw, but going to several stores to fill the pantry can be an inconvenience, especially in an urban setting..."

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