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Bloomberg has a story about how Dollar General has a new format store - dubbed DGX, it “is about half the size of Dollar General’s regular 9,000-square-foot stores. Carrying everything from bug spray to beer, it's a tidy mashup of a drugstore, convenience store and corner grocer, but with lower prices and free Wi-Fi.”

The story notes that this is part of CEO Todd Vasos’ plan to target urban, millennial shoppers who “are starting to settle down and look for reliable, affordable places to shop.”

The DGX stores are being tested in Philadelphia’s Northern Liberties neighborhood (variously described as “hipsterville” and “millennial nirvana”), Raleigh, NC, and Nashville, TN. Bloomberg says that Vasos has said he plans to almost double the number of stores he has in the US - from 15,000 to 28,000 - and finding a workable format for the nation’s cities is a key part of his strategy.

There are likely to be bumps in the road, Bloomberg reports: “Dollar General faces entrenched competition in urban markets, from convenience and drug chains to rival discounters like Family Dollar, which already has many stores in cities. In Northern Liberties, there’s a Family Dollar just up the street from the DGX, although the aisles are cluttered with unpacked boxes, and certain items were out of stock during a recent visit … Competition aside, Dollar General will find it tougher to turn a profit in cities thanks to higher real estate, labor and logistics costs. The company’s operating margins are already under pressure, having narrowed by a full percentage point over the past two years as sales of less profitable perishable food has increased.”
KC's View:
I don’t think DGGX can depend on hipsters to take it to the promised land, but I do think that developing a differentiated urban format makes a lot of sense. A traditional dollar store might not appeal to urbanites, but a more targeted format? Sure. Why not?