How Dollar General can stay so cheap, even with prices of goods rising

Dollar General
Dollar General deals.

  • Supply chain shortages, rising shipping costs, and wage hikes are forcing up the cost of goods.
  • Dollar General says it hasn’t raised prices recently and doesn’t plan to.
  • Here’s how it offsets costs to keeps prices down.

Rising shipping costs, supply chain shortages, and wage hikes are making the cost of goods such as food and household items more expensive.

Some retailers are raising prices for customers to offset this trend. Dollar General says it hasn’t and doesn’t plan to drive up prices.

“We have a lot of levers at our disposal to make sure that we don’t have to pass all that on to the consumer,” Dollar General CEO Todd Vasos said on the company’s most recent earnings call.

The chain sells products at 20% to 40% less than drug and grocery stores. Here’s how it keeps its prices low:

It offers a no-frills shopping experience

Dollar General
Scaled back stores.

Dollar General doesn’t own its stores, which helps to keep real estate costs down. Stores are small – on average 7,400 square feet, while the average Walmart store is 178,000 square feet) – and have a bare-bones design: metal shelves, strip lighting, and low-cost signage.

It is truly a no-frills shopping experience, suitable for the customer who wants to get in, buy what they need, and get out. According to Dollar General, the average shopping trip to its store lasts no more than 10 minutes.

It has a limited selection of products

Dollar General
10,000 to 12,000 SKUs.

“We don’t carry every brand and size, just the most popular ones,” Dollar General states on its website.

Each store has between 10,000 and 12,000 unique products. Around 60,000 are found at a typical supercenter like Walmart. Carrying a limited number of items gives Dollar General more buying power with suppliers, as it buys in bulk.

It keeps labor costs down

dollar general vallejo california
Fewer workers.

Its no-frills stores require less staff to run, keeping labor costs down. According to UBS, its employee wages are also lower than its competitors.

Its understaffed stores and low wages have been criticized in the past and led to workers quitting in some locations, however.

It carries private-label goods

Dollar General
Own-brands.

It stocks a selection of private-label goods, which have higher margins than national brands as the company has greater control over manufacturing costs and can set its own prices.

It stocks limited amounts of fresh produce

Dollar General
The fresh food section at a Dollar General store.

The majority of Dollar General stores don’t offer fresh food or perishable items, which have shorter shelf lives and tighter profit margins.

Critics say this is bad for local shoppers as it limits their access to fresh food. But from a business perspective, it helps to keep margins strong.

Dollar General packages items in small quantities

Dollar General
Not for the bulk buyers.

Instead of selling items in bulk, Dollar General sells small quantities of items to keep the cost of each transaction down.

It might seem like you are getting a better deal as the prices stay below $10, but ultimately, you’re likely paying more on a per-ounce or per-item basis.

Nevertheless, this lower-ticket value serves its core customer well, as they might not necessarily have the disposable income to shop in bulk.

It cuts costs in the supply chain

dollar general truck
Cuts out the middle man.

Dollar General is constantly looking at where it can cut costs in its supply chain.

In an earnings call earlier this year, CFO John Garratt said that the company plans to expand its private truck fleet to reduce its exposure to third-party carrier price fluctuations.

Its stores are located predominantly in rural locations

An exterior shot of a Dollar General store
Around 75% of its stores are in towns of 20,000 or fewer people.

Dollar General’s strategy since the early 2000s was to go where Walmart wasn’t. The majority of its stores in the US are located in rural and suburban areas, which cost less to run due to lower rent and labor expenses.

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Companies across the US are offering workers perks for getting the COVID-19 vaccine. Here’s the running list.

covid vaccine card cdc
ICU nurse Megan Tschacher shows off her vaccination card at UC Health Poudre Valley Hospital in Fort Collins, Colorado on December 14, 2020. Helen H. Richardson/MediaNews Group/The Denver Post/Getty Images

  • Workers across the US can receive extra pay from their employers for receiving the COVID-19 vaccine.
  • Many front-line workers are now able to receive the vaccine in various states and localities.
  • So far, almost 34 million people have received one or more doses of the two-shot immunization.
  • Visit the Business section of Insider for more stories.

Companies across the US are joining in the largest-ever vaccination effort by offering employees perks if they receive the two-dose COVID-19 vaccine.

Receiving the vaccine is voluntary, but most companies have strongly encouraged employees get the immunization when it’s their turn. The two-dose vaccines, one from Pfizer and BioNtech and the other from Moderna, were emergency approved in the US in December. Since then, almost 34 million people have received one or more doses, according to data from the Centers for Disease Control and Prevention.

Many states and localities have begun moving from the first phase of vaccinating health care workers and elderly living in long-term care facilities to immunizing front-line workers. With that, some companies are giving workers two to three hours of paid time off per dose received, and others are offering a stipend for employees who voluntarily get the shots when it’s their turn.

Recently, Publix, Petco and AT&T joined the growing list. Here’s the 18 Insider knows about so far:

Know of a company not on this list that’s offering employees time off, pay, or other perks to get vaccinated? Email Natasha, the reporter of this piece, at ndailey@insider.com.

1. Target

Target
Eduardo MunozAlvarez/VIEWpress via Getty Images

Target is offering workers up to four hours of paid time off to get both shots of the vaccine and will pay for Lyft rides up to $15 for employees needing transportation to and from their appointment.

2. Dollar General

dollar general
Justin Sullivan/Getty Images

The discount chain was the first major retailer to announce an incentive for workers to get vaccinated. Dollar General employees can earn up to four hours of pay for receiving both doses of the COVID-19 vaccine and will receive extra time off if they have an adverse reaction.

Read more: What’s coming next for COVID-19 vaccines? Here’s the latest on 11 leading programs.

3. Darden Restaurants

olive garden
Patrons enter an Olive Garden Restaurant. Steve Helber/AP Photo

Darden Restaurants, which owns Olive Garden, LongHorn Steakhouse, Bahama Breeze, and The Capital Grille, will offer workers four hours of paid time off, two hours per dose, Bloomberg reported. Employees must show proof of their vaccination to earn the time. The company doesn’t require the shots, but strongly encouraged workers to get them.

4. Shake Shack

shake shack
Noam Galai/Getty Images

The burger-and-shake restaurant chain will give workers 3 hours of pay per shot of the two-dose vaccine. Shake Shack didn’t mandate employees receive the vaccine but “strongly encouraged” it.

5. Noodles & Company

Noodles & Company.
Noodles & Company.

Workers will earn up to four hours of paid time off for receiving the vaccine, the company said in a Feb. 10 statement to Insider. The restaurant strongly recommended employees receive the vaccine but did not require it.

6. Kroger

kroger
Kroger logo is seen at one of their stores in Athens, Ohio. Stephen Zenner/SOPA

The grocer is giving employees a one-time $100 payment for getting the vaccine. On top of that, Kroger said it would give associates an added bonus of a $100 store card and 1,000 fuel points to “thank and reward” workers during the pandemic.

7. Trader Joe’s

Trader Joe's.
Joe Raedle/Getty Images

The grocery retailer will offer all 50,000 employees two hours of pay per dose and allow for flexible scheduling so workers can make it to appointments.

8. Aldi

Aldi store shop
Matthew Horwood/Getty Images

The German grocer will cover employee costs associated with receiving the vaccine and provide two hours of pay for each of the two doses received.

9. Instacart

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SOPA Images/Getty Images

The app will offer its US and Canada shoppers, who deliver groceries to customers, a $25 stipend to get vaccinated.

10. Lidl

lidl
Leonhard Foeger/File

The German grocery chain is encouraging workers to get vaccinated by offering its US workers $200 in extra pay if they receive the immunization.

11. McDonald’s

GettyImages 185747043
Scott Olson/Getty Images

The fast food chain is giving workers four hours of pay for receiving the vaccine. Though getting the shots is not required, the company said it will connect employees with groups that can answer questions on the vaccination, Restaurant Business reported.

12. Starbucks

starbucks barista drinks
Richard Drew / AP Photo

The coffee chain is offering workers two hours of pay per dose of the COVID-19 vaccine they receive.

13. Chobani

Chobani Greek Yogurt
Sarah Schmalbruch / INSIDER

Chobani will give workers up to six hours of pay, three per dose, for receiving the vaccine, Human Resource Executive reported.

14. Amtrak

Amtrak
AJ Packer/Shutterstock.com

Amtrak is allowing employees to get vaccinated during work hours, and will pay for two hours off if employees provide proof they received the shot. Workers will also be excused with pay for up to 48 hours if they have side effects.

15. JBS USA and Pilgrim’s

jbs meatpacking greely colorado
The JBS meatpacking facility in Greeley, Colo. Chet Strange for The Washington Post via Getty Images

The meat-packing company is offering employees a $100 bonus incentive if they receive the vaccine voluntarily.

16. Petco

petco groomers
Petco groomers. AP Photo/Richard Vogel

The pet-supply retailer told Insider it would offer employees a one-time payment of $75 for getting vaccinated. Plus, it will give a $25 donation to the Petco Partner Assistance Fund for each person who receives their shots.

17. AT&T

AT&T
People walk past the AT&T store in New York’s Times Square, June 17, 2015. Brendan McDermid/Reuters

AT&T is giving employees up to four hours of paid time off per dose, adding up to eight hours total for anyone who needs the hours to get the vaccine, a spokesperson said in an email to Insider. The company is also giving workers access to Castlight, a tool to help them find available vaccines in their area based on eligibility.

18. Publix

Publix grocery store night
Johnny Louis/Getty Images

Publix will give associates a $125 gift card to the store after they get both doses of a COVID-19 vaccine. Workers aren’t required to get the shots at Publix, but they will need to show proof of vaccination. The vaccine is optional, though encouraged, the company said.

19. Walmart and Sam’s Club

Walmart

Beginning May 18, Walmart and Sam’s Club will give its associates below the store manager level $75 for being fully vaccinated, the companies announced on May 14. Workers are required to show their vaccine card in order to receive this bonus.

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Dollar General at center of labor unrest controversy after frustrated workers walk off job in Maine citing low wages and understaffed stores

dollar general maine
  • Dollar General employees quit in protest over understaffing and low pay at a store in Eliot, Maine.
  • “They figured that they had me trapped in a job that I couldn’t get out of. To some degree they were right,” one worker told Insider.
  • The walkout at the Dollar General follows much labor unrest in the state in recent months.
  • See more stories on Insider’s business page.

Berndt Erikson worked as the nightly closer and key-holder at a Dollar General in the small town of Eliot, Maine. After every shift, he’d count up the money generated by the store and clean up before heading out.

But when he closed up shop on May 3, he knew he wouldn’t be going back.

Erikson and his fellow employees walked out of the store that day, leaving signs on the windows highlighting what they say were unacceptable working conditions at the retailer.

He said that understaffing, low wages, and frustration over a lack of communication from the company’s district management ultimately led to his decision to move on. In total, two employees and a manager quit the store, leaving one sole staffer remaining.

“Out of respect for these individuals, as well as the value we place on open and direct communication with our employees, we do not plan to comment on their employment status further,” Dollar General told local news station WMTW in a statement. “Our Eliot store remains open to provide the York County community with convenient, affordable access to everyday essentials.”

The company did not immediately return Insider’s request for comment.

Erikson had started at the Maine Dollar General in January 2020, after getting laid off from a local Super Shoes store. But very quickly, he said, the Dollar General began hemorrhaging workers. Pay for workers stayed around $13 an hour on average, which Erikson says was not a living wage in that part of Maine.

“People started to try to find better jobs, or they just had enough of being worked to death and being disrespected by both corporate and customers,” he told Insider. “We were already understaffed the entire time I had worked there, but it got to a point where we were not able to keep up.”

Keeping lean store staffs is a part of Dollar General’s business model, and one of the reasons the chain has been able to expand its footprint at such a rapid rate. In 1992, the company operated 1,522 stores in the US. As of February 26, 2021, Dollar General has a fleet of 17,266 stores across 46 states.

However, critics say that having so few employees to man the stores creates an unsafe environment, leaving workers as targets for robberies and violence. In Erikson’s case, he said that anti-maskers and anti-vax customers often screamed at employees, adding further tension to an already-difficult work environment. Meanwhile, requests by store managers that he receive a raise for his work were often ignored.

“They figured that they had me trapped in a job that I couldn’t get out of. To some degree, they were right,” he said.

But eventually, Erikson said, he decided that it would be better to seek out work with a different employer. And he’s not alone. As the coronavirus pandemic winds down, many business owners have complained about a tightening labor market, with employees quitting their minimum wage jobs to seek higher-paying roles.

The day before Erikson quit, the store manager left. He later called the acting district manager numerous times to say that he couldn’t man the entire store from opening to closing, but never heard back. Fed up, he and his coworker wrote up the signs – even including a special message to Joe, a beloved regular customer who’d often buy them sodas – and locked up the place at 4 p.m. that day.

The store opened back up the next day, with assistance from the acting district manager.

“The Dollar General walk-out in Eliot is yet another example of service sector realizing the true value of their labor after suffering with low wages, poor treatment and lousy working conditions,” Maine’s AFL-CIO union communications director Andy O’Brien said in a statement to Insider. “While business owners are constantly whining and complaining about how they can’t find enough people to work for them, they still refuse to pay living wages to attract employees and the workers are fighting back.”

O’Brien added that, in the case of Dollar General, workers say the company expects in-store salaried employees work 70 to 80 hours a week. O’Brien said that a bill in the Maine legislature could make most salaried employees earning up to $55,000 a year eligible for overtime pay, which would “prevent the kind of blatant exploitation of salaried employees that Dollar General continues to get away with.”

The walkout at the Dollar General in Eliot isn’t the only flicker of labor unrest to occur in the state in recent months. According to O’Brien, “the pandemic and the sacrifices frontline workers have had to make” have sparked a recent victory for striking shipyard workers, an ongoing strike by delivery drivers and mechanics, and successful union drives among nurses and museum workers in the state.

“When working people win, other workers become inspired and that’s why we’re seeing more of these kinds of wild cat strikes and walk outs,” O’Brien said. “It’s an exciting time to be alive.”

Erikson told Insider that he’s well aware that he may be retaliated against, or black-balled from future retail jobs. But he said he’s glad that his story has resonated with frustrated retail workers around the country, based on the reaction on social media. He also said that, in a way, his experience at Dollar General has helped bolster his self-esteem.

“I eventually got fed up with it and started to see my own self worth,” he said. “I actually gained the confidence to fight back, which is probably what led to me leaving in style. So thank you, Dollar General.”

Are you a Dollar General employee or a retail worker with a story to share? Email acain@insider.com.

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The CDC is reportedly eyeing a ‘promising’ partnership with Dollar General to bring vaccines to rural communities, and Target is expanding access to shots with in-store CVS clinics

dollar general
dollar general

  • The CDC is eyeing a potential partnership with Dollar General, USA Today reported.
  • Dollar General has locations within 10-15 miles of rural communities in 46 states, the CDC said.
  • Target is now offering vaccine doses through over 600 in-store CVS pharmacies in 17 states.
  • See more stories on Insider’s business page.

In the latest efforts to expand access to COVID-19 vaccines, the Centers for Disease Control and Prevention is reportedly looking a partnership with Dollar General to bring vaccines to rural communities, while Target and CVS are working together to expand the rollout in 17 states.

Target began providing vaccine doses on Wednesday in over 600 CVS pharmacies located inside its store locations, the company said in an emailed statement to Insider. Eligible people can find an appointment through CVS’s website.

Shots are available at store locations in Virginia, New York, Alabama, Texas, Louisiana, Arizona, Hawaii, Ohio, Florida, South Carolina, Maryland, Connecticut, Massachusetts, Rhode Island, New Jersey, California, and Pennsylvania, the retailer said in the statement.

Target added that, “as states open up vaccines for frontline and essential workers, we’ll work with CVS and others to offer vaccines to team members within our stores and distribution centers in the future.”

Separately, the CDC is looking into working with Dollar General to expand vaccine outreach to Americans in rural areas, USA Today reported on Tuesday.

“We’re exploring a promising collaboration with Dollar General stores, which have locations that include refrigeration capacity within 10 or 15 miles of our rural communities in all but four states,” CDC director Rochelle Walensky said Tuesday at Health Action Alliance’s National Business Summit, according to USA Today. Dollar General has over 17,000 stores in 46 states.

Dollar General did not immediate respond to Insider’s request for comment.

Dollar General was the first retailer to announce plans to pay workers to get vaccinated. In January, the discount store said it will offer all 157,000 employees four hours worth of pay if they get the vaccine.

In February, the White House announced that over 40,000 pharmacies nationwide are set to receive vaccine doses to give to eligible people for free per the rollout of the Federal Retail Pharmacy Program for COVID-19 Vaccination.

Last month, select CVS Pharmacy locations began offering around 570,000 COVID-19 vaccine doses in 17 states as part of the program. CVS administered over three million vaccines and 15 million COVID-19 tests nationwide by mid-February.

The pharmacy chains and retailers partnering with the government in vaccine distribution include Walgreens, Walmart, Rite Aid, Kroger, Publix, Costco, Albertsons, Hy-Vee, Meijer, and Winn-Dixie.

To date, 95.7 million vaccine doses have been provided to people in the US, according to Bloomberg’s COVID-19 tracker. An average of 2.17 million doses per day were administered this week, according to Bloomberg data.

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Americans are expected to spend their third stimulus checks on clothes, home improvement, and dining out – and it could boost stores like Kohl’s and Home Depot

coronavirus stimulus checks memes
Getty Images

  • Outdoor dining and home improvement stores will benefit from Americans spending stimulus checks.
  • Value retailers like Walmart and Dollar General will also benefit, as in the past, Jefferies said.
  • Past stimulus checks have provided a crucial boost to the economy amid the COVID-19 pandemic.
  • Visit the Business section of Insider for more stories.

Retailers and restaurants are poised to see a boost in Americans buying goods if President Joe Biden signs the $1.9 trillion stimulus package, as expected.

Apparel, home improvement, outdoor dining, and travel companies are set to benefit from Americans who receive the extra $1,400 in their bank accounts, analysts at Jefferies said in a Monday note.

After the last stimulus checks in January, retail sales that month saw an 8.9% bump, indicating consumers want to spend the extra dollars, Jefferies said. This time around, the checks, which in most cases are more than twice the amount of January’s, could boost sales once again.

Read more: Buy these 14 stocks set to go into overdrive as consumers’ stimulus checks arrive in March, Cowen says

Some retailers who didn’t see much of a lift in the last stimulus round because of the “dead of winter” will likely benefit this time because of the spring season. With the nice weather, home-improvement projects and outdoor dining will be on the rise, so Home Depot, Lowe’s, Olive Garden-owner Darden Restaurants, and Outback Steakhouse-owner Bloomin’ Brands are poised to benefit. Apparel stores such as Ross and Burlington Coat Factory also will see a bump, per the report.

The January spending bill increased Americans’ year-over-year spending 20%, according to Bank of America research. Those who received the checks also spent 30% more on their credit cards than people who didn’t. Value-based retailers, like Walmart, Kohl’s, Dollar Tree, and Dollar General, saw an increase from the January checks, and they’ll “see outsized benefits” this time around, too, Jefferies said.

Companies most affected by shutdowns caused by the COVID-19 pandemic a year ago were department, clothing, and shoe stores, along with restaurants and furniture stores, Jefferies said. Those same companies are now likely to “generate the most opportunistic areas for spring 2021 stimulus benefit,” the note said.

One survey, however, wasn’t as optimistic that spending would ensue from the next round of stimulus checks. The survey, conducted by Morning Consult and commissioned by Bloomberg, found that 34% of Americans, many of whom lived in wealthier households, planned on putting the $1,400 into savings.

In April last year, many Americans received the first round of stimulus checks, worth $1,200. Most people used the money to buy the basics: groceries and medicine. Many also used the cash to buy takeout meals and even streaming and gaming services as they hunkered down at home. Big box retailers like Walmart and Target posted blowout sales for that quarter last year, saying stimulus checks were largely to thank.

At the time, the checks gave the economy a crucial boost, according to experts. Now, on the third round of government spending as the federal debt increases, President Joe Biden has said, “now is the time to go big,” adding that the government can’t spend too much to help the economy.

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Retail trade group slams Texas and Mississippi for lifting mask mandates, saying it puts workers at risk

masks stores
Joanne Millar store manger of Joules in Belfast places a sign in the shop window advising customers that face masks must be worn at all times as face coverings are now compulsory for shoppers.

  • Texas and Mississippi governors announced mask mandates will be lifted.
  • Retail trade group RILA opposes the moves and calls it a “premature victory celebration.”
  • Retail workers have had to enforce mask rules and risk dangerous confrontations in the last year.
  • Visit the Business section of Insider for more stories.

Texas Governor Greg Abbott just announced the lifting of the state’s mask mandate by an executive order effective on March 10. Mississippi Gov. Tate Reeves also announced that state mask mandates would be lifted and businesses would be allowed to operate at full capacity beginning March 3. The Retail Industry Leaders Association (RILA) has already opposed the move, Nathaniel Meyersohn at CNN reported.

RILA counts as members some of the biggest retailers in the country, including Target, Walmart, Lowes, Walgreens, and Dollar General.

“Relaxing common-sense safety protocols like wearing masks is a mistake. We are certainly supportive of governors re-opening their economies and giving beleaguered restaurants and other small businesses the opportunity to rebuild and rehire workers,” RILA Executive Vice President of Communications and State Affairs Jason Brewer told Insider in an email. “But going backwards on safety measures will unfairly put retail employees back in the role of enforcing guidelines still recommended by the CDC and other public health advocates. It could also jeopardize the safety of pharmacies and grocers that are gearing up as vaccination centers.”

Several RILA members are also vaccine distribution sites, including CVS and Wegmans. 

“Tremendous strides have been made in recent weeks lowering the rate of COVID-19 infections and vaccinating seniors and other vulnerable populations. We should not jeopardize this progress with a premature victory celebration,” Brewer said. 

Since the beginning of the pandemic, US retail workers have been tasked with the job of enforcing mask policies. Employees were left in the difficult position of not having official mask policies, or not being allowed to ask customers to mask up.

Some customers have refused to wear masks for political reasons, and encounters have even turned violent, with workers shot or assaulted for asking customers to wear masks. Of stores that did not let employees enforce mask rules, spokespeople cited concerns for employee safety.

Texas has the most COVID-19 hotspots of any US state, with 10 counties reporting more than 100 cases per 100,000 residents over the past week. Infection rate counts were artificially low in late February when a severe storm overtook much of the state, but numbers are starting to rebound.

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