Is Dollar General Amazon-Proof?

While many of the physical world's established retailers are feeling a pain with a name — and the name is Amazon — one seems to be almost magically able to avoid the sucking pull of eCommerce's gravity.

But while stores from Macy's to Walmart and from Saks to Sears have been feeling the bite of Amazon and its increasingly popular Prime shipping program, Dollar General has quietly been plugging along and outperforming almost everyone else in the market.

This has been the case since the Great Recession, which is obviously a "favorable" condition for a store in the business of selling discount goods. But part of the win here isn't just a lucky timing situation; Dollar General has show a real knack for outthinking the marketplace as well.

In the last half decade, stock price has tripled and operating income has picked up 50 percent. Though that success was initially buoyed by consumers with a real material incentive to find a bargain when the economy was teetering on the edge of a cliff, the chain has managed to keep customers coming back even as economic conditions have improved.

And the uneven nature of the recovery, with employment up but wages down and income inequality on the incline, means that Dollar General is seeing its consumer base continue to grow.

And Dollar General knows that base, as evidenced by its expanded entry into tobacco sales lately just as other big name retailers like CVS and Costco have left or are planning to leave the products behind. Low-income Americans, ironically, are the nation's biggest spenders on cigarettes — and lower gas prices seem to have contributed to more smoking. Tobacco sales were on the rise in the U.S. for the first time since 2006 this year.

And Dollar General has one thing Amazon doesn't: Convenience via proximity is a huge factor and in many cases is the most accessible retailer for a large group of Americans. Drug stores with a similarly ubiquitous presence have seen similar growth.

Dollar General is also seemingly immune to some cost-inflating trends, like organic food, in favor of low-cost grocery items. A strong dollar has also been less of an issue, as that has the net effect of lowering the costs of the imported goods that Dollar General runs on. It has been a limited player in eCommerce, because, realistically, their average customer isn't dropping $99 a year on an Amazon Prime membership.

They might be well served by, but likely don't know it exists.



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