Shownotes
This Omni Talk Retail Fast Five segment explores Dollar General's plans to test a new subscription membership program and whether value-focused shoppers are ready for another retail membership offering.
Chris Walton and Ben Miller debate the opportunities and risks of launching a paid program, including delivery benefits, customer loyalty, and whether Dollar General's assortment can support a compelling value proposition.
The conversation also examines how subscriptions have transformed retail and why pilot programs remain one of the most effective ways to test new ideas.
⏩ Tune in for the full episode here: https://youtu.be/toy5NmyXau4
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Transcripts
Dollar General plans to introduce a new pilot subscription program.
Speaker A:So according to Google, by way of various sources, while specific pricing and exact rollout dates have not been finalized, Dollar General membership is expected to offer exclusive discounts, special deals and added convenience for frequent shoppers.
Speaker A:The news comes after CEO Todd Vassos recently told analysts that the company was seeing a major shift in the type of shoppers frequenting its stores.
Speaker A:This is a quote.
Speaker A:We are seeing customer penetration growth across low, middle and high income segments as customers across all income cohorts seek value at increasing rates.
Speaker A:Notably, he went on, across these cohorts, the largest increase in customer count came from the highest income segments, those who earn more than US$100,000 annually.
Speaker A:So, Chris, super interested to hear your thoughts on this one.
Speaker A:Do US consumers need another Walmart plus like subscription program and do they need it from Dollar General?
Speaker B:Oh, wow.
Speaker B:I think wholeheartedly, yes.
Speaker B:I think this is a great move by Dollar General.
Speaker B:I'm all for this, especially when you're just talking about a pilot stage.
Speaker B:Right.
Speaker B:And I think it'll end up rolling out too.
Speaker B:I really do, Ben, and it's for all the reasons I said before.
Speaker B:It's basically like it's a no risk pilot idea.
Speaker B:Like if you get people to pay for it, great.
Speaker B:If you don't, you shut it down.
Speaker B:Or even if you get a few people that pay for it, it doesn't really cost you that much to run it once you have the program established and in place.
Speaker B:So it's great profit if it works.
Speaker B:And here's the other point I'd make, and I think this is really important, like Dollar General has an advantage in its locations and where they are, that it should be able to command additional value for those locations.
Speaker B:It's the retailer, when you stop and think about that is closest to the entire US of anybody, including Walmart, including Amazon.
Speaker B:It has 20,000 locations, particularly in the rural, the rural communities where Amazon particularly is not, as you know, is not able to reach as easily.
Speaker B:So yes, I mean Dollar General, if anyone should have a subscription program because they should be able to command that additional value for the service they could provide with same day delivery even faster than same day delivery to their customers that want it.
Speaker B:And that's the key thing is how many people want it.
Speaker B:And I don't think you're ever gonna find out until you try.
Speaker A:So.
Speaker B:So again, I'm going back on the stump of what can go right.
Speaker B:And if this goes right, it's a huge boon for Dollar General.
Speaker A:Okay, well, in which case I will happily come in with the what could go wrong.
Speaker A:Okay, I, I, I don't love it.
Speaker A:And I'll take.
Speaker B:You're gonna pee in my pool.
Speaker B:Ben Miller.
Speaker B:Okay, go ahead.
Speaker A:I, I, I am, I am, I am.
Speaker A:Don't love it.
Speaker B:Yeah.
Speaker A:Look, Donna, General is starting to perform okay again at the moment.
Speaker A:Yeah, you know, they're not at a great run, but you know, they're seeing 3 to 4% growth.
Speaker A:And, and they've done that, Chris.
Speaker A:They've done that by going back to the fundamentals.
Speaker A:They've rolled back some programs, they've just focused on the basics.
Speaker A:And there is a, there is some coming back to one of the big trends that we've been talking about for a while, which is the mixed signals that are coming out of the US consumer at the moment.
Speaker A:I find this a bit of a worry.
Speaker A:You know, the Dollar General is seeing growth across all segments because that signposts that there are more people in the US economy who are struggling right now.
Speaker A:Now for Dollar General, this is super important because if you think about the call the core Dollar General customer when times are bad and their income is contracting, where can you go?
Speaker A:They can't trade down, they can't trade down, they buy less items.
Speaker A:So for dg, actually it's really important that they can bring more people in at those times to keep, to keep their business going.
Speaker A:I don't really buy into the importance of a hundred thousand dollar households to them because I'm pretty sure it's a very small base.
Speaker A:So proportionately.
Speaker A:Okay, great, we're seeing that.
Speaker A:But the DG model is about simplicity, Chris, and it's about walking in no matter who you are, democratized and you're going to get a good deal, you're going to get the best possible price.
Speaker A:Adding in the extra complexity of a membership program requiring a subscription, requiring something to pay for up front to be able to get those good prices is, I'm not sure that's in keeping with the Dollar General brand.
Speaker A:I'm not sure it's necessarily what their shoppers are looking for.
Speaker A:Walmart and Amazon can get away with it because the they is so compelling everything they put into program.
Speaker A:But this is, but this is the.
Speaker A:Okay, well that's what can go wrong.
Speaker A:So what can go right?
Speaker A:Let's find out.
Speaker B:Yeah, I'm chopping at the bit.
Speaker B:Yeah, I'm chopping at the bit to retort.
Speaker A:Let's go.
Speaker A:Tell me everything I've seen wrong.
Speaker B:No, no, you go, you go.
Speaker B:You got more.
Speaker B:You Got more.
Speaker A:You go, no, it's really hard to know what the value props going to be.
Speaker A:So what are they going to put into that deal and how much are they going to charge for it?
Speaker A:Because if it's, if the answer isn't we're putting a lot in and we're charging not a lot for it, then I'm worried.
Speaker B:Right, right.
Speaker B:Okay, so here's my retort, Ben, here's my retort.
Speaker B:So my retort is all those arguments you made were the same arguments people were making against Walmart doing Walmart plus to begin with.
Speaker B:If you look back, if you rewind in history, whenever they announced that program, which I don't even remember when it was now, those are the exact same arguments.
Speaker B:And so the question I would have though is couldn't the same rationale hold true for Walmart in terms of, for Dollar General in terms of the fact that, you know, people are more squeezed, everyone at different income stress is starting to move down.
Speaker B:So people that want same day delivery or want to leverage Dollar General for even cheaper options but get the same day delivery benefits or even less delivery depending on how they do it again could potentially gravitate downward.
Speaker B:And also the other factor here, which Walmart has been, I don't want to say open, but it's been pretty transparent in like how, how it's being talked about anyway is like the reason people are signing up for Walmart plus is many of them don't have to go in a Walmart store.
Speaker B:So if you want to get the value of Dollar General.
Speaker A:Yeah.
Speaker B:Without going to Dollar General store because you do happen to make a certain income level but you are feeling the pinch and you don't want to talk about it publicly.
Speaker B:This could have some, some hooks for you too.
Speaker B:So that's where I think those are all the what ifs I think that are really out there when you start drawing the comparison analogies because I think economics shows over time people always gravitate towards the lowest price.
Speaker B:So who's to say there isn't some segment of the population that is monetarily valuable that want same day delivery from the Dollar General prod assortment that lives in its arena every single day.
Speaker A:And I think that's the big ask because drawing a comparison between DG and Walmart, they're merchandising the brands that are available and the products that they can are very different.
Speaker B:I, I heard is the one that's the one hang up.
Speaker A:But that's the stretch.
Speaker B:You got to prove it out with the assortment Right.
Speaker B:You got to prove it out that the assortment provides enough of a hook to make the subscription and the delivery tie ins valuable.
Speaker B:Right.
Speaker B:And that's why you pilot it.
Speaker B:Right.
Speaker B:So, like, I mean, I think.
Speaker B:So if that.
Speaker B:With that said, Ben, would you definitely warrant a pilot, or would you be, like, so skeptical of the operations that you wouldn't pilot?
Speaker B:Because I think there are some things that if you're skeptical enough, you don't even go pilot stage.
Speaker A:I, I, I, I could pilot it, but you would do it.
Speaker A:Small geography, low risk, and you keep it really isolated.
Speaker A:Because the last thing the DG business needs is disruption, just as it's getting the machine going again and just as it's been able to reduce complexity.
Speaker A:So as long as you can prevent the contagion without sounding CFO negative about it.
Speaker A:Yeah, you run that pilot.
Speaker A:Yeah.
Speaker B:Yeah.
Speaker B:It's an interesting point, too, because the other thing that's happening in the background is they have a new CEO coming in, you know, and I want.
Speaker B:And they've got a new format coming that they're talking about in the same announcement that they talked about the subscription.
Speaker B:So JJ Fleeman's coming in as the CEO as well.
Speaker B:So, like, you wonder how on board he is with this.
Speaker B:You got to think he is, because there's been a long transition period.
Speaker B:But these are big moves, to your point.
Speaker B:And so do you want them right now?
Speaker B:I think those are questions well worth having in the boardroom.