Anything for a Buck: The Story of Dollar General
S1: I’m Seth Stevenson, the host of Thrilling Tales of Modern Capitalism. Last week, our episode was about Wholefoods and Amazon’s efforts in the world of groceries. As part of our reporting on that world, one of the people we spoke to was Stacey Mitchell, a co-director at the anti conglomerate nonprofit group Institute for Local Self-reliance. And Stacy told us something interesting, that there’s another type of huge national player in groceries expanding its footprint wildly in a different part of America.
S2: If you live in Whole Foods land, you probably never much run into a Dollar General or a family dollar. But for a lot of Americans, that’s a primary source of grocery shopping. I mean, those stores are really prevalent and there is Whole Foods land and there is dollar store land. And those two geographies don’t really intersect at all.
S1: Whole Foods targets a relatively high income customer, but in poorer areas, urban black neighborhoods, rural white towns, it’s the dollar stores that are taking over food shopping.
S2: And what concerns me is that if you live in Whole Foods land, you basically never visit dollar general land and therefore you’re just really out of touch with the dire straits that a lot of people are living in.
S1: Last week’s episode took place in Wholefoods Land this week, Quinlivan, one of our producers, is taking a look at Dollar General Land. Here’s Clio.
S3: About 10 years ago, Vanessa Hall Harper started to notice something strange going on in her neighborhood in north Tulsa, Oklahoma.
S4: I was just driving around in my community and you would see development taking place. You would see dirt being moved. And then it just got to the point where every damn time, you know, you fell. I wonder what’s going there and end up being a damn dollar store. And I’m like, what? What, why? Why do we need a dollar store down the street from another dollar store?
S3: If you’re not familiar with dollar stores, a lot of what they sell is food, but their selection is mostly non-perishable items, frozen stuff and alcohol. Lots of Campbell’s soup and cereal and Hamburger Helper and not a lot of fresh produce or fresh meat and dairy. Dollar stores aren’t meant to be real grocery stores full of fresh food. They’re designed for Felin trips to grab a quick microwave dinner in the middle of the week. The dollar stores, with their smaller scale and selection, don’t need to pay as many workers as grocery stores. And they can focus on the high margin package products, which happened to be the unhealthy ones. When the dollar stores moved into North Tulsa, they started driving grocery stores out.
S4: Is one of those things that you look up in. It’s like, wow, it seemingly happened overnight. You don’t have to be an economist to understand that when you proliferate any area, that it can obviously have an impact on other types of services and other types of businesses. We are here to monitor breaking ground and we’re going to be changing laws in 2016.
S3: Vanessa ran for city council. Her platform included bringing a grocery store to North Tulsa, currently
S4: almost 12 years. People that live in north Tulsa, not 12 years earlier than. In the most fluent parts of September. And so that’s just basically not right. And so what can we do in order to change that? We’ve got to flip the script on that. And so the first step
S5: is bringing equality. But this is just one story.
S3: Vanessa won her election, but the dollar stores kept coming when yet another dollar store was approved in 2017 with no grocery store in sight. Vanessa had had enough. She rallied district residents outside the site of the new store, discouraging shoppers from bringing business there. Where did that movement protest the new store come from? Hemi.
S4: Would you yeah, I was like, OK, we’ve told them this is not what we want, they’re going to do it anyway. So this is our response. And we protested.
S3: And you were actually out there?
S4: Yeah, I made the science.
S3: The protest wasn’t successful, that Dollar General location remained, and that one store was just one tiny part of a much, much larger expansion. Meanwhile, Tulsa is not the only place where dollar stores are multiplying. Dollar General now has 17000 stores in the U.S., twice what it had a decade ago. The company says that about 75 percent of Americans now live within five miles of a dollar general. During the pandemic, when so many brick and mortar stores faltered or collapsed, Dollar General thrived. The company opened more than 1000 new stores in twenty twenty and plans to open even more this year. For people living in the communities where Dollar General proliferates, there can be something heartening about seeing storefronts filled in the midst of so much failure. But while dollar stores can provide inexpensive shopping in places that don’t have many other options, they’re also changing those places in ways that aren’t always for the better. So how did a company that started as a small father son business in the midst of the Great Depression become a transformative retail giant? How did Dollar General become the default source of food in so many towns across America? And as dollar stores multiply, what effect are they having on the communities they serve? I’m only 11 filling in for Seth Stevenson, welcome to Thrilling Tales of Modern Capitalism today on the show. Anything for a buck, a story of Dollar General. JL Turner was a traveling salesman who lived in Scottsville, Kentucky. Here’s his grandson, Hal Turner Jr.,
S6: my functionally illiterate grandfather, who had a third grade education and was 11 when he lived on the mortgaged farm and his father was killed and he was in charge of the family.
S3: Turner quit school to support his mother and siblings. He never got a formal education, but grew up and started a family and worked a variety of retail jobs until the Great Depression hit. When local general stores were going out of business, J.L started buying up their merchandise and selling it to the department stores that were still running. He enlisted his son, Cal Senior, to help him.
S6: He and my father started the company at that time named Jill Turner.
S3: Inson jail and Cal weren’t satisfied with wholesaling and eventually they started opening retail locations of their own. By the 1950s, they had grown their family business to 35 stores in Kentucky and Tennessee. Department stores in those days used to run promotions called dollar days, heavily advertised monthly sales during which department stores would sell goods for a single dollar. That gave Carl the idea to build an entire store around that Eye-Catching and memorable price point, a store where every day would be dollar day. Dollar General. There’s a story about Carol and one of the early Kentucky stores that kind of became company law. Here’s Phil Wahba, a reporter for Fortune.
S7: When the general started decades ago, he had a surfeit of material for men’s paths, which was pink corduroy, and he just had to liquidate it for his supplier. And so I ended up selling these parts for one dollar. And then there’s this crazy pictures of people in this small town in Kentucky where all the men are in pink corduroy. So, you know, it’s it was a funny way to start it. But he happened upon this idea of the simplicity of the price point and things being cheap and people just wanting to come to the store.
S3: In 1968, Dollar General went public at around the same time, jail’s grandson, Carl Jr., took over. He said that when he inherited the company, its books were in a shambles.
S6: We went public in December and in January somebody said something to me about an annual report and I said, What’s in the report we held? You have. OK, so I went in my office, closed the door and by myself wrote the first annual report of the company. And I decided on the theme of profitable growth for our company
S3: under Karl Jr, Dollar General became a little more professional. They formulated a budget. They improve their supply chains and updated the technology in their stores, and they learn to pick locations for new stores.
S4: Fill WABA again.
S7: You know, it’s a science. You go you look at the down to the zip code, how much money people are making, how many people there, what’s the average age, how many kids do they have? So these are the kinds of things that over time he brought in that really turned general into what it is.
S3: Dollar General’s core customer today is a woman with a household income of forty thousand dollars or less. And that’s always Dollar General is targeted. People on the lower end of the economic spectrum, guided by that strategy called Junior, aggressively expanded the company’s footprint. Over the next couple of decades, he grew the business to more than 6000 stores with more than six billion dollars a year in sales. Once he’d figured out the kind of places where a dollar store could thrive, he put them everywhere he could.
S7: Their stores are seven thousand square feet and they’re in small towns, so they’re literally everywhere, so you don’t have to drive far to find one. And so people have come to consider the dollar stores as a good alternative for daily staples. They’re convenient. They’re all over the place. And also they make for very good in and out trips. You go and you pop in, you buy a few items and you’re out within minutes.
S3: Dollar General always had a keen understanding of who their core customer was, a low income person, often in town in rural America, where the Dollar General was the only option. Todd Vassos, the current CEO, has described the Dollar General shopper as someone who, when they’re running out of ketchup, doesn’t immediately buy a new bottle, but rather waits until it’s all gone and then picks one up on the way to work. Dollar General was happy to continue catering to this customer and didn’t attempt to go upmarket.
S7: You know, at first it was intuitive. You just small town store, you know, your customers. But as you grow, of course, it can be easy to become estranged from your shoppers. But they never did that. They always knew exactly what their customer needs and where they’re going to go for it. You know, they never tried to get to fancy.
S3: After Carl Junior retired in 2002, the company brought in its first CEO from outside the family, David Perdue had recently executed a successful turnaround at Reebok. He would later get elected to the Senate from Georgia. Perdue continued on Carl Junior’s path of aggressive expansion, but the strategy got out of control and the growth became bloated. Meanwhile, he had to contend with increasing competition from Wal-Mart, which had Dollar General like offerings, along with a huge selection of other goods and services. For the first time, Generals’ quest for growth had backfired, and in 2006, the company closed 400 locations. In 2007, private equity company Kohlberg Kravis Roberts and Co. bought Dollar General, took it private and changed the management team. KKR timing was lucky as one year later, the 2008 recession drove bargain seeking shoppers into dollar stores in droves. And once those customers had discovered dollar stores, they never looked back.
S7: You know, intuitively you’d think, OK, well, I understand when there’s a downturn, people will go to dollar stores more. But what’s ended up happening? Is through each economic slowdown, they’ve kept a lot of the shoppers who’ve come to them,
S3: KKR took Dollar General Public again in 2009 and sold their position in 2013 to shareholders as the company continued to flourish. Last year, another economic downturn, as well as a pandemic, boosted Dollar General yet again. The company increased sales in the first quarter of twenty twenty by almost 30 percent. While competitors like Wal-Mart have put a lot of money into building our e-commerce dollar, General continues to succeed by just being the closest brick and mortar option across America.
S7: Well, Dollar General just absolutely killed it last year. You know, the headlines are full of retail apocalypse this and the death of stores that. But this is a company that’s been opening a thousand stores a year for the last few years.
S3: Dollar General has plans to open another 1000 plus stores in twenty twenty one in the long term. CEO Jeff Owen says he can see the number of stores doubling in the U.S. to roughly thirty four thousand.
S7: They’re going to become a much bigger part of retail in the coming years, even after decades of growth. I wouldn’t say they’re just getting started, but they are absolutely on a trajectory to become much bigger even than they are today.
S3: The business story is a clear win, but when you talk to people in districts that already have five or six or seven dollar stores, they aren’t quite as thrilled with the notion of even more dollar store expansion.
S4: It was definitely a decision, in my opinion, where profits were placed over people. More on that when we come back.
S3: Grocery stores started leaving Vanessa Hall, Harpers North Tulsa District in the early 2000s, local grocers blamed it on what they called the Wal-Mart effect when Wal-Mart supercenters arrived in neighboring areas, offering huge selections of goods at low prices, people started driving to them rather than shopping locally. Smaller stores couldn’t compete in 2007, the last major supermarket in the area and Albertsons shuttered stores. I. To Dollar General, this was an opportunity a few years after the Albertsons closed Dollar General moved into North Tulsa, they could compete with Wal-Mart’s prices. And while you needed to drive about 15 minutes to get to the nearest Wal-Mart before parking in its massive lot and wandering its massive aisles, you could walk to the Little Dollar General on the corner and be in and out in no time. The dollar stores filled the niche the grocery stores had abandoned. People drive out to Wal-Mart on the weekend and restock with a quick midweek grocery run closer to home for people without cars who couldn’t drive to the Wal-Mart, the dollar store became the main option. Vanessa wasn’t happy about it.
S4: You know, when I see your family walking to the dollar store and they’re walking out of there with seven or eight bags knowing that there was nothing in those bags healthy, you know, that really bothered me.
S3: After Vanessa organized that protest outside the Dollar General store on Pine Street, the company added a produce aisle to the store, which made it the only dollar store in town with fresh options. But the mere presence of all those dollar stores had still made north Tulsa an unattractive location for traditional grocery stores. Retail districts are ecosystems where participants actions affect the shared environment. Wal-Mart comes in, so supermarkets leave, supermarkets leave, so dollar stores come in. Dollar stores are a hardy species well adapted to struggling neighborhoods where customers are pressed for time and money. Once they’ve found a suitable habitat, they’re hard to dislodge. Vanessa has tried to use the political process to introduce more diversity into the retail environment of her district. She borrowed legislative language and tactics from a wealthy white resort town near San Diego that had limited chain stores in the name of preserving local character. In April 2018, the Tulsa City Council passed an ordinance that limited the number of dollar stores and helped bring grocery store to North Tulsa. We spoke to her in April right as the store was getting ready to open.
S4: I’m going there at least once a week. They actually stocking the groceries and totally excited about it. We had a job fair when we got kids in the community that, you know, I want to work in and I want to work here. So it’s a happy day. I think I’ll turn a cartwheel on that day when we when we open the open the doors.
S3: Those doors opened in May when the Oasis Fresh Market greeted its first customers. People in other parts of the country are following Tulsa’s lead
S8: dollar stores could soon become a thing of the past. In Cleveland, city leaders introduced legislation that would keep new locations of Dollar Tree, Family Dollar and Dollar General out of the city. The legislation was enough. That’s what DeKalb County officials are saying to the owners of dollar stores. The county does not want to see any more of the discount chains popping up any time soon.
S4: Dollar stores dot the landscape. They offer bargains, to be sure. But overall, are they a deal or no deal? A question which helps explain why Fort Worth passed new restrictions on them just this past week. They call an email, but then when they want to talk to me about just, you know, the nuances, you know, I said, OK, this is what’s going to happen. You know, your regional chamber of Commerce, like Walmart, they’re going to come out against you because they’re going to see this as anti business. Your legal department within your government is probably going to say we don’t need to get into this because we’re going to be sued. We weren’t. But, you know, those are just the roadblocks, if you will, that are going to come up.
S3: Dollar General has addressed efforts like Vanessa’s with the statement, We are disappointed that a small number of policy makers have chosen to limit our ability to serve their communities. The company has also emphasized its new produce offerings, some Dollar General stores now stock a selection of fruits and vegetables, but those special aisles will only be in about five percent of stores nationwide. In any case, it’s hard to believe Dollar General is all that worried about regulation for every neighborhood that’s using local government to slow the company down there. Dozens more where the company is opening new stores with the cooperation and enthusiasm of local communities. Dollar General got its start in the throes of the Great Depression and catapulted to its modern day success amid the 2008 recession. The company does its best business in hard times, in hard hit communities, and once it takes root, it’s very hard to dislodge. It’s worth watching whether more people like Vanessa Hall Harper will try to dislodge it.
S1: That was our producer, Cleo Levin. Next week, I’ll be back with a story about returning to the hair salon.
S6: Seth, I’m not doing this anymore. Go get your damn haircut.
S1: OK, that’s next week on Thrilling Tales of Modern Capitalism. This episode was produced by Jess Miller. Editing on this episode was by me and Gabriel Roth, Slate’s editorial director for Audio, and Alicia Montgomery, executive producer of podcast at Slate. June Thomas is senior managing producer of the Slate podcast network. Aitzaz Solutia is managing producer. I’m Seth Stevenson. See you next week.