Dollar General’s sales per square foot have risen steadily in recent years, to $229, but they’re still far below the industry average of $325 and less than half of Walmart’s. Their gross profit margins were 30.9 percent over the last five years, though, compared with 25.1 percent at Walmart. The dollar chain doesn’t carry the big-ticket purchases—bikes, appliances—that Walmart does. It thrives mostly on selling low-ticket items and basics, such as toilet paper, that help shoppers on tight budgets get through the week. At Dollar General, a package of eight Pop-Tarts is $2, or 25¢ a tart. At Walmart, shoppers can buy the same eight-pack, but more often they save by spending $9.98 for a bulk package of 48—only 20¢ a tart. Dollar General doesn’t offer much bulk. A Dollar General store also has lower startup costs; it spends as little as $250,000 for a new store, vs. the more than $15 million Walmart puts into a new Supercenter.
The company declined to comment for this story, but in March 2016, Chief Executive Officer Todd Vasos outlined the chain’s “2020 Vision” for 125 investors gathered at a hotel in Nashville, south of the headquarters in suburban Goodlettsville, Tenn. (Shareholders include T. Rowe Price Associates, the Singapore sovereign wealth fund GIC, BlackRock, and Vanguard Group.) The presentation detailed a site-selection strategy focused on small towns, dubbed “Anytown, USA.” Then Jim Thorpe, Dollar General’s chief merchandising officer at the time, defined the core customer for the investors: “Our Best Friends Forever”—an extremely cash-strapped demographic, with a household income less than $35,000, and reliant on government assistance, that shops at Dollar General to “stretch budgets.” Thorpe said these BFFs represented 21 percent of the chain’s shoppers and 43 percent of its sales. His final slide touted a goal of increasing sales 50 percent, to $30 billion, by 2020.
There are really only two ways brick-and-mortar retailers can meet such a grand goal: open hundreds of stores or, much harder, radically increase same-store sales. Vasos’s presentation included a map that looks similar to an epidemiological forecast, with yellow and green dots spreading like a pox. The yellow dots represented the chain’s 12,483 existing stores. The 13,000 green dots were the “remaining opportunities”—some in low-income urban neighborhoods, but most in small and very small towns. There’s almost no white space east of the Mississippi, except for the tip of Maine and southernmost end of Florida. The Rust Belt is overflowing with green dots piled upon yellow, and the Eastern Seaboard is almost exclusively green.
Dollar General’s chief rival, Dollar Tree Inc., which also owns Family Dollar, has a plan that’s almost as ambitious. In a recent Securities and Exchange Commission filing, Dollar Tree indicated that it believes the U.S. market can support 10,000 Dollar Trees and 15,000 Family Dollars. That’s almost 11,000 more stores than its current 14,500, though it isn’t putting a timeline on the expansion. In August, Randy Guiler, vice president for investor relations at Dollar Tree, told me it would “determine each year what our pace of growth will be.”
“It reminds me of a craps table,” Brown, the commercial real estate analyst, says. “Essentially what the dollar stores are betting on in a large way is that we are going to have a permanent underclass in America. It’s based on the concept that the jobs went away, and the jobs are never coming back, and that things aren’t going to get better in any of these places.”
So the future of small-town America is not even Walmart. It’s the dollar store chains. And that’s not great when it’s your only option, either as a consumer or as an employee. But there are huge opportunities here because, combined, there are still a lot of people in these towns. The endemic struggles of these places is part of our broader national failure to have a rural planning strategy that makes any sense at all. It’s pretty much just about waiting for these people to move or die, which isn’t a strategy at all.
I will say that the one weakness of this story is that the whole thing is coded white. The profiled town is in the same county as Walmart headquarters in Bentonville, Arkansas, which is a white area, being the Ozarks. But the meatpacking industry there has led to a big racial transition. In 2000, the town was 16.5 percent Latino. In 2010, it was 28.4 percent Latino and presumably that number has increased since then. Yet every person talked to seems to be white. Given that Latinos tend to open their own stores, that’s part of the story too. Moreover, it’s worth noting that this nation has always had a permanent underclass–people of color. That’s hardly a new thing. But in this story, as in so many others, especially since the election, non-whites are largely erased from these stories of working class hard times. The article at least mentions Latinos in meatpacking, but that’s it. So there’s more to this story. But it’s still important in making us aware of the need for a real rural policy in this country. If nothing else, the outsized political impact of rural communities and low-population states should make this a priority for the left.