17 / 11 / 2020

The Dollar General Gamble (Or It’s All Uphill from Here)

At the bottom of a mountain, you have nowhere to go but up. The same is true for discount retailers. But the similarities stop there, because going up a mountain is easier than going down, while taking a brand up in price and quality can be damn near impossible.

Carey Smith | Founding Contrarian

When you’re a discount retailer who’s already staked a claim to every available inch of landscape, what’s left to conquer? The invasive Dollar General chain, which has seeded itself along rural roadsides and in every one-horse town, has decided it’s time to set its sights on a more affluent clientele. The Wall Street Journal reports the company is going after shoppers who can afford to pay up to $5 for “joyful” items at the new retail outlets that Dollar General has christened Pop Shelf. (After expensive consultation with a branding agency, no doubt.)

The company is taking a gamble that a slightly more monied demographic will be unable to resist home decoration (or is it home desecration?) items such as signs that say “blessed” and “gather” and silk flower bouquets. Their plan is to rotate them frequently to create a “treasure hunt” excitement to the shopping experience.

Why does this sound familiar? Oh yeah. Tuesday Morning tried the same gimmick. It staked its reputation on having different items every week, and even persuaded Lauren Bacall, of all people, to shill for it. But Tuesday Morning filed for bankruptcy earlier this year, and I’m guessing that Pop Shelf won’t have a very long shelf life either.

The idea of trying to move a brand up-market is appealing — Wal-Mart’s been trying for years. Ikea, too. Even Dollar General itself has repeatedly tried, as the article points out. But in the immortal words of Ringo Starr, it don’t come easy. Going in the opposite direction is a breeze, in comparison, and that’s just one of the reasons we invest only in top-quality brands at Unorthodox Ventures.

Humans are always going to aspire to something better. We’re just programmed that way. And when we believe we’re getting that better thing at a good price, we’re quick to purchase, especially if we already have a positive association with a brand and trust we’ll be getting the same quality. That’s why established, high-quality brands will always have an easier time offering more affordable products than what Dollar General is trying to do. 

Dollar General hopes that by concealing Pop Shelf’s “provenance” behind a different name, the stores will be able to win over new customers. “Customer-facing-wise, we are going to do our best to keep those two brands separated,” said Dollar General’s CEO.

Good luck with that. If you’ve ever read the fable about the donkey that wraps himself in a lion’s skin, then you know that eventually the donkey can’t help braying with pride about how all the animals fear him, and by braying, he gives himself away.

I suspect that unless Dollar General can figure out a way to lend a similar “Tarzhay”-like cachet, à la Target, to Pop Shelf, then its new venture will suffer the same fate as that donkey. Then it’s only a matter of time before the “treasures” sold at Pop Shelf show up in the clearance aisle of a Dollar General near you.