Dive Brief:
- Dollar General is bringing its Popshelf concept to the discounter's larger-format DG Market stores with two shop-in-shops added this month, according to a press release.
- The stores, both in Tennessee, are the first to incorporate Popshelf into other Dollar General formats. It comes after Dollar General launched the concept, which has higher prices and a higher-income target customer, last year.
- The company plans to open around 25 combination stores in 2021. That is on top of the 50 stand-alone Popshelf stores Dollar General plans to open this year.
Dive Insight:
Popshelf is a dollar store tailor made to middle-income suburban women. As such, the concept is essentially the first of its kind.
Popshelf offers Dollar General a channel for products with price points a few dollars higher than those of its core stores and a chance to conquer the suburbs. With prices mostly at $5 and under and a treasure hunt atmosphere, analysts have described Popshelf as a kind of adult version of Five Below.
To create the treasure hunt effect, merchandise is replenished frequently and includes seasonal and home decor products, as well as health and beauty, cleaning, arts and crafts, party products and toys.
The banner has its own merchandising team, though, as Joseph Feldman, retail analyst and assistant director of research with Telsey Advisory Group, told Retail Dive in a recent interview, Dollar General can bring a "heavy pencil" to negotiations with vendors to get good deals for the company.
Along with different merchandising and price points, Popshelf requires a larger labor footprint to operate, likely in part of because of its frequent replenishment.
To date, Dollar General has opened 16 Popshelf stores and has additional stores under construction in Alabama and South Carolina. Ultimately, the company sees an opportunity for around 3,000 Popshelfs across the U.S., though it hasn't said if or to what extent that includes combination stores.
CEO Todd Vasos said the shop-in-shop concept "further demonstrates our innovative spirit and track record of format development." Vasos added that the company "aim[s] to deliver the value and products customers trust from a DG Market with the continually-refreshed merchandise" of Popshelf through the combined format.
One analyst, Scott Mushkin of R5 Capital, has criticized the plan for Dollar General to mix Popshelf with other of its namesake banners.
"The upside of co-mingling is maybe in some of your DGSs you can put a Popshelf and you can enhance returns a certain amount, and that's good," Mushkin told Retail Dive in an interview earlier this month. "What's the downside? The downside is you freaking tarnish the Popshelf brand and you never get the results. The downside is significant because you can screw up something that's just amazing."
Dollar General is in the early phases of its Popshelf experiment, and learning as it goes along. One thing is clear: The retailer has big plans for the concept and sees a rich opportunity in it. Already, its Popshelf stores are showing higher sales and better margins than its traditional format. And the company is blazing ahead with its build-out plans while it learns how to operate a concept essentially new to the company and the dollar sector as a whole.
Grand openings for the combo stores in Tennessee are scheduled for July 31.
