‘If Walmart And 7-Eleven Had A Baby…'

A crafty mix of convenience and low prices turned Dollar General into a retail giant. How much bigger can it get?

- Phil Wahba

THE BOXY, BRICK-FRONTED shop in the town square of Scottsville, Kentucky (population: 4,500), is one of the oldest stores in the Dollar General chain—and it looks its age. The aisles are cluttered; the ceilings are low; the lights are dim. There are rows of plastic storage containers, towers of paper towels, and fridges full of frozen pizzas—the kind of seemingly random, dirt-cheap bric-a-brac that fits the drab dollar-store stereotype.

But not far past the entrance, shoppers can spot something incongruous: a sleek cooler full of Starbucks drinks, topped by the coffee chain’s smiley mermaid logo. There, a shopper can grab a Doubleshot espresso for $2 or get two cans of frappuccino for $5. They’re the sort of modest extravagances associated more with bougie city thoroughfares than with rural town squares—and, with the nearest actual Starbucks a 30-minute drive away, in Bowling Green, they’re a magnet for caffeine cravers. And frappuccinos aren’t the only semiupscale impulse purchase on the shelves. This Dollar General also offers Keurig K-Cups and Dannon yoghurts; not long before Christmas, it started selling Lego kits priced from $8 to $20.

“Just because I don’t have a lot of money, that doesn’t mean I don’t feel like having some of the finer things,” says Todd Vasos, CEO of Dollar General, paraphrasing his prototypical shopper. “We can offer her both value and an indulgence she may want.”

Vasos is on target about his customers’ income. Some 57% of Dollar General’s clientele live in households with income of less than $49,900, according to research firm Kantar, and 30% get by on less than $25,000. (The average U.S. household income is just under $61,000.) Of the 25 stores visited in reporting this article, each had a sizeable poster in its window saying the location accepts food stamps.