Wall Street expected sales at Dollar General to drop as the economy approved. As people gained financial confidence, the expectation was they would ‘trade up’ to Target or one of the big box retail chains. Instead, Dollar General (DG) reported sales growth at existing stores. “We have seen no sign of trade out or trade up from our core customers,” Dollar General chief executive Todd Vasos said. “Even in a good economy, [consumers are] still looking for value and convenience.”

Quick Facts:

  • Sales at Dollar General stores open for at least a year increased 3.7% last quarter compared to a year ago
  • Dollar General has posted 28 straight years of same-store sales growth
  • 75% of Dollar General locations are in towns with 20,000 or fewer people
  • Customers buy packaged foods, groceries, home essentials, clothes, and personal care products; the majority of it is sold for less than $5
  • Dollar Tree (DLTR), which sells everything for $1, also reported higher traffic
  • Dollar Tree stores grew 3.7% last quarter compared to a year ago

Buying More Clearance-priced Items

During times of economic growth, Dollar General customers keep coming back to the store—and they tend to add a few extra items to their baskets. Customers are spending more on packaged foods, groceries, home essentials, clothes, and personal care products. This type of inventory—consumer packaged goods—are being sold for less than $5.

Dollar General’s Customer Base

Dollar General caters to low-and-middle-income shoppers, mostly in rural and suburban America. The company tends to open stores in rural areas with 20,000 or fewer people where a big chain is not within 15 or 20 miles. Typically, economic booms tend to impact smaller towns in a delayed fashion, and when it does, it’s usually at a smaller scale than the larger cities. So many customers will continue to shop the dollar stores, but might add one or two extra items.

How Discount Stores Source Inventory

Discount stores such as Dollar General and Dollar Tree can typically have deals to acquire inventory directly from manufacturers or larger liquidators. This doesn’t always work for smaller discount and dollar store owners; however, auction platforms such as B-Stock provide an opportunity for buyers to connect directly with major retailers in a transparent, online marketplace.

How Large Retailers Benefit

For retailers, B-Stock provides an online platform to auction off excess and returned inventory to resellers operating discount and clearance stores. By selling excess inventory to the highest bidder, retailers can increase recovery rates and margin.

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