Dollar General's Suburban Popshelf Ambition Pays Off With 40% Gross Margin
By CultureBanx Team
- Dollar General’s suburban store, Popshelf has annualized sales ranging from $1.7 million to $2 million per store
- 39% of African Americans live in the suburbs
Dollar General’s new suburban store, Popshelf, that offers items for $5 or less has been wildly successful so far, which could lead to massive expansion. This shopping concept has seasonal and home décor, health and beauty must-haves which has annualized sales ranging from $1.7 million to $2 million per store, compared with $1.4 million for first-year sales at a standard Dollar General. As the company wades deeper into the suburbs where 39% of African Americans live, just how valuable will the Black dollar become for the company’s bottom line?
Why This Matters: While other retailers were shuttering during the pandemic, Dollar General bucked the trend by launching an entirely new format and opened 8 Popshelf stores between October 2020 and May 2021, with impressive metrics across the board. Gross margin is 40%, eight points higher than a traditional Dollar General. To keep sales going with its new Popshelf concept tapping into diverse suburbs will be key. The company’s stock has gained about 25% over the past year, bringing its market cap to more than $50 billion.
Dollar General’s targeted customers are primarily women who are located in diverse suburban communities, with a total household annual income ranging from $50,000 to $125,000. Typically, the low-cost chain has largely catered to customers on a tight budget to shop at the company’s more than 16,000 stores. Right now their average shopper comes from a household that earns $40,000 or less per year. In 2019, the U.S. Census Bureau released data showing the median income for an African American household was $39,490, putting them right in the Dollar General consumer sweet spot.
Moving to the suburbs have become increasingly more diverse, with 39% of African Americans calling the area home in 2014, according to the Brookings Institute. That’s a noticeable shift from 2000, when only 33% of African Americans lived in the suburbs, and exactly why they should be on Dollar General’s radar. Not to mention the $1.4 trillion dollars in spending power that they possessed in 2019, which is expected to grow to $1.8 trillion by 2024, according to the Selig Center for Economic Growth.
What’s Next: Even before the recession, the discount retailer was growing rapidly and this next phase of suburban growth should be just as strong. It’s not just the Popshelf stores that Dollar General is expanding, it plans to open 1,050 stores, remodel 1,750 sites and relocate 100 others in 2021. Dollar General sees an opportunity to eventually open 3,000 Popshelf stores nationwide.
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