Dollar General Addresses A Pain Point In Rural America

By now you have probably read about the shrinking middle class in the United States. Part of this is driven by reduced mobility of the American workforce. In the 1990s, 3% of Americans moved out of state every year. Today that rate has fallen to 1.5%, with U.S. mobility at its lowest level since World War II. In rural areas, the shift has been even more dramatic. In the late 1970s, 7.7% of people in rural areas moved across a county line. In 2015, that rate was down to 4.1%.

This lack of mobility has created a pain point for those living in smaller towns that have suffered from the decline of manufacturing and farm consolidation, making jobs in these rural areas harder to come by. The number of employees on manufacturer payrolls is today only about one-third of what it was 10 years ago according to the U.S. Census Bureau, with the majority of the job losses in rural areas. Unemployment in such regions has average 7.7% over the past year compared with 4.7% nationally.

When we see pain points, we look for those who are able to address them. In this example, we see retailer Dollar General (DG) bucking the downward trend in brick and mortar retailing by focusing on ways to serve those in this struggling communities. Their customer base is more insulated from the Amazon effect in that their typical customer is less likely to go online to stock up on the necessities but rather gets only what he or she needs only when absolutely necessary. While Wal-mart (WMT) has continued to focus on large stores with lots of “big-box” type products, Dollar General has followed a different strategy.

While many large retailers are closing locations, Dollar General executives said they planned to build thousands more stores, mostly in small communities that have otherwise shown few signs of the U.S. economic recovery.

The more the rural U.S. struggles, company officials said, the more places Dollar General has found to prosper. “The economy is continuing to create more of our core customer,” Chief Executive Todd Vasos said in an interview at the company’s Goodlettsville, Tenn., headquarters.

These numbers tell the story.