At Dollar General, sales of “consumable” goods are up. But profits are down.
At Dollar General, sales of “consumable” goods are up. But profits are down.
At Dollar General, you can buy everything from fake flowers to lightbulbs to plain, white T-shirts. But the bulk of the company’s sales come from what the retail world refers to as “consumables.” These are things we use up on a regular basis, like milk, cereal and trash bags. And Dollar General’s selling more of those.
The company reported Thursday that its net sales for last quarter were up compared to the same time a year earlier. Specifically, sales of consumables rose 6%. However, profits went down.
One frequent purchaser of consumables at Dollar General is Baltimore resident Jason Cordova. You might call him a Dollar General regular: “I just walk over all the time, like, probably three, four times a week,” he said.
On Thursday, Cordova picked up a PayDay candy bar and chocolate-covered raisins. He also regularly buys lunch meat, bread and sometimes chalk for his kids. He shops at Dollar General for these kinds of things because he likes the prices.
“The corner store is going to charge you a lot, like $5 for deodorant. Here, you get it for $2, $3,” he said.
Cordova’s out of work right now, so he’s on a budget. And 60% of Dollar General’s sales come from households that earn less than $35,000 a year.
Retail consultant Mark Cohen said price is everything for these shoppers. “Especially with regard to consumable products, things they buy, they feel they must buy on a regular basis.”
People will still shop around to get the best deal. So, even when wholesale prices for consumables rise, Cohen said, Dollar General can only charge so much.
“If their prices were to become less ruthlessly competitive, they would get clobbered,” he said.
If the chain attracted fewer bargain-seekers, overall profit margins could suffer.
“The profit formula for a store like this, especially Dollar General today, is: Get the foot traffic, get people in the store by buying the consumables. But then, they also offer housewares,” said Willy Shih, a professor at Harvard Business School.
Back in Baltimore, Joseph Salmon gets everything from food to laundry detergent and household goods at Dollar General. Thursday, he purchased a Glade automatic spray holder to make his home smell nice.
While we were talking, he opened the package to see if the air freshener itself was included. “I don’t think there’s one in here,” he said. “That’s OK. I’ll go back.”
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