Dollar General, which operates the nation’s largest chain of 17,000 discount stores, announced on a call with analysts Thursday (March 18) that it intended to dramatically expand its fresh produce offerings, reported Grocery Dive. For the some time now, the company has been expanding further into the grocery space with its DG Fresh facilities, enabling further distribution of refrigerated and frozen goods. The addition of fresh fruits and vegetables to hundreds of stores nationwide places the discount chain in even more direct competition with both local grocers and large supermarket chains.
“We now have produce in more than 1,100 stores,” Dollar General’s chief operating officer Jeff Owen said on the call. “For 2021, we…plan to add produce in approximately 700 stores, bringing the total number of stores that carry produce to more than 1,800.”
The chain’s approach to grocery is very brick-and-mortar-centric, focusing on creating shelf space and adding high-capacity coolers. While Dollar General did introduce DG Pickup, a buy online, pick up in-store (BOPIS) option during the year, and the company does have a limited online store, it does not deliver groceries, and its digital channels lag far behind other retail giants. In terms of speed and convenience, the chain’s grocery offerings likely will not be able to compete with those of leaders in the space, like Amazon and Walmart, whose digital offerings include quick and affordable delivery and a range of pick-up options.
Still, Dollar General’s strength comes from its low prices and its wide availability. As Owen said on the call, “We believe DG Fresh provides a potential path forward to expanding our produce offering to more than 10,000 stores over time, as we look to further capitalize on our extensive self-distribution capabilities.”
In previous years, Dollar General has been accused of contributing to food deserts, offering inexpensive but low-nutrient dry goods that low-income consumers opt for instead of traditional groceries, placing often debilitating pressure on local grocers. Now, offering fresh produce to those same communities where the chain may have contributed to the closures of local grocery stores, it has a chance to bring nutritious options back to depleted areas, especially if grocery proves to be profitable for the company.
So far, grocery certainly seems to be pulling its weight, driving sales in the last year, as consumers have turned towards at-home meal prep where previously they may have eaten out. Owen said on the recent call, “DG Fresh continues to be the largest contributor to the gross margin benefit we are realizing from higher initial markups on inventory purchases, and we expect this benefit to grow as we continue to scale this transformational initiative.”
As something of a digital holdout, however, Dollar General may have a tough road ahead in the post-pandemic future. Industry experts predict that leaders in the category will be those who can execute across channels, providing a compelling in-store experience, a seamless ecommerce journey, and a smooth integration of the two, with digital checkpoints in brick-and-mortar locations. To come out on top, retailers will need to earn their share of spending amid grocery’s hybrid future, offering convenience and immediacy with innovative digital options.
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