#019: Dollar General – What 75% of Americans won’t believe
Play • 14 min

You know that big yellow sign. 75% of all Americans live within 5 miles of a Dollar General. That’s right, 13,000 stores. Here is the amazing story of how J.L. Turner created this Empire.

Dave Young:

Welcome to the Empire Builders Podcast, teaching business owners the not so secret techniques that took famous businesses from mom and pop to major brands. Steven Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those.

[Aurora Pro Services Ad]

Dave Young:

Hey, Stephen, you got a dollar I could borrow?

Stephen Semple:

Well, you going shopping?

Dave Young:

Heck yeah. I’m going to Dollar General. You see them everywhere. They’re all over, everywhere. Big yellow sign.

Stephen Semple:

Here’s a scary stat when it comes to how big Dollar General is. 75% of the population in the United States lives within five miles of a Dollar General store. They do just under $30 billion in sales, a buck at a time.

Dave Young:

Out of a tiny little store that’s smaller than any supermarket you’ve ever been.

Stephen Semple:

Yeah, most of their stores are only a couple thousand square feet. And today they have 17,000 stores, 143,000 employees, and are doing 30 billion in sales.

Dave Young:

Mind boggling.

Stephen Semple:

Mind boggling.

Dave Young:

How’d they do it?

Stephen Semple:

Well, all this started back in 1939, right in the midst of the Great Depression. And they started out of Scottsville, Kentucky by J.L. Turner and his son Cal. And they both invested $5,000 to start their first store. And they really invented the idea of the dollar store. So J.L. Turner was a traveling salesperson. He was functionally illiterate. He had a grade three education. When he was 11, they lived on a mortgaged farm and his dad died and he had to quit school to take care of the family. And he worked in retail up until the point of the Depression. Local businesses were dying all around him. So what he did is he bought the merchandise from these businesses that were going out of business and turned around and sold them to department stores.

Stephen Semple:

And this gave birth to their first idea, which was J.L. Turner and Sons. By the early 1950s, they were doing 2 million in sales. So 10 years after starting, they grew this business to 2 million in sales in the 1950s. By the mid 1950s, they had 35 stores in Kentucky and Tennessee. Pretty good, right? But the real success came next. What J.L. noticed was in retail stores at the time, one of the things that was really popular was to run these dollar days. The store would set aside a section of the store and for a day, say everything in that section is on sale for a dollar. He loved the simplicity of that idea. So in 1955, they renamed the store Dollar General and decided that what they were going to do was focus on this whole idea of everything for a dollar.

Dave Young:

Okay.

Stephen Semple:

So they had these really small stores, non-perishable items and consumables, focusing on selling everything in the store for a buck all the time. So in one way, they did something that is different. Almost all of the empire builders that we’ve talked about today have looked outside their industry and found an idea from outside their industry they brought to their industry, but what they found was something that was done in their industry, but limited, done every once in a while and only a portion of the store. What they said, “Why can’t you make a whole store that way? And every day?”

Dave Young:

What’s really cool is what they noticed was the excitement of their customers about things for a dollar.

Stephen Semple:

Right.

Dave Young:

It’s not, “Oh, we could sell a lot.” It’s they actually noticed the excitement of their customers that gave them the realization that that was a direction they could go.

Stephen Semple:

And they also loved the simplicity of what that did for the business. So in 1968, they went public. So in 1955 they became the Dollar General store, 1968, basically 13 years later, they went public. And at that point they had sales of 40 million. So you remember in 1950, 2 million, 1968, 40 million in sales, one and a half million in profitability. In 2007, they were taken private, a private equity firm came along and bought them in 2007 for $6.9 billion. During this time of growth one of the things they got very good at was determining where to locate stores. It would be easy to sit there and say, “Well, what you should do is increase the size of the store.” And they didn’t. They kept all their stores small. They located primarily in small towns. Instead of doing bigger stores, did more stores. So instead of going, “We could consolidate all this and have one big store,” but they recognized for their consumer, because they’re selling convenience, ease, having three small stores in the neighborhood is better than having one large superstore. And they kept to that formula.

Dave Young:

The employee base of three small stores is going to be still a fraction of what you would pay employees at a large supermarket or a large hardware store.

Stephen Semple:

There’s another empire that we’ve highlighted in past podcasts. So if somebody wants to go back and listen to the podcast on Starbucks, which is one of our earlier ones, Starbucks has also used that page in their playbook. Starbucks, multiple locations, all over the place. Lots of small stores.

Dave Young:

Yeah.

Stephen Semple:

So Starbucks learned from Dollar General and basically used that in their playbook.

Dave Young:

My daughter lives in upstate New York in a tiny little town. She could drive 15 minutes to a big, nice Wegmans or two miles to a Dollar General.

Stephen Semple:

Right.

Dave Young:

And she goes to the Dollar General a whole lot more than she goes to the Wegmans.

Stephen Semple:

Dollar General opened 1000 stores in 2020.

Dave Young:

In 2020, during the pandemic.

Stephen Semple:

Yes.

Dave Young:

1000 stores.

Stephen Semple:

1000 stores. Here’s the thing that they got very good at. They created a process for where to locate the stores. They looked at a number of measurable factors and decided what those locations would be like. And their core target is women with household income of $40,000 or less. And that determines everything. The customer’s not the type of person who goes and buys four bottles of ketchup so they have ketchup available. Their customer’s a person who runs out of ketchup and goes and buys ketchup.

Dave Young:

Yeah.

Stephen Semple:

“Oh, we’re out of ketchup. I’m going to pick up ketchup today.” They wait until they’ve run out of ketchup to buy ketchup. That’s their customer. And their customer buys small amount of things on a regular basis. But understanding that has determined everything, has determined where the stores are located, has determined how it’s laid out, has determined what the stock. It’s low income, small towns, more store idea, comes from understanding that core customer. They do did not go upmarket. They did not go larger. They did not go fancy.

Dave Young:

Yeah.

Stephen Semple:

They stuck to their knitting and repeated it and repeated it and repeated it and repeated it. They found a formula that worked and multiplied that formula.

Dave Young:

It seems to me, they’ve reinvented the neighborhood store, the corner store. When I was a kid in a town of 6,000 people in the middle of nowhere, there were at least four little neighborhood grocery stores in our town. And then Safeway opened a great big store and those guys all went belly up, but it was the place you could walk three blocks to get a new bottle of ketchup.

Stephen Semple:

Right.

Dave Young:

My mom could send me down there to pick up a pack of cigarettes for her and they’d hand him to a seven year old kid and let him walk home with them.

Stephen Semple:

Well, and the funny thing is today Dollar General is being accused of the reason why a lot of grocery stores are going out of business. We’ve gone full circle.

Dave Young:

We’ve gone full circle and so instead of it being mom and pop, like a guy from the neighborhood that says, “I think I’m going to open up a store right here.” It’s this giant corporation that says, “You know what? There used to be stores in all these neighborhoods. Let’s do that again.”

Stephen Semple:

Yeah. But the real lesson is this.

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

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Dave Young:

Let’s pick up our story where we left off and, trust me, you haven’t missed a thing.

Stephen Semple:

But the real lesson is this. So if you want to grow, you want to build an empire, you want to become big, you find the formula that works and multiply that formula. Far too often I’m seeing businesses want to grow by line extension or adding customers or adding new things rather than saying, “No, do more of what you do well.” Instead of adding another business or doing a line extension open another shop down the road, in the next town over.

Stephen Semple:

Great example is our friend, Brian Scudamore. Brian Scudamore is the founder of 1-800-GOT-JUNK, self-made billionaire, and he’s now started some new brands, Shack Shine, and WOW 1 DAY PAINTING, but he didn’t start new businesses and new home services opportunities until he almost fully exhausted 1-800-GOT-JUNK. When all of a sudden he’s sitting there saying, “There are no more places to put a 1-800-GOT-JUNK franchise. I need to look for a new opportunity.” But he didn’t do that until he exhausted every opportunity for 1-800-GOT-JUNK.

Stephen Semple:

There’s a great book, 22 Immutable Laws Of Branding by Ries and Trout, full of all sorts of stories of big companies that tried to do line extension and just blew it.

Dave Young:

Yeah.

Stephen Semple:

So it’s about getting good at what it is you do, creating that repeatable media strategy as well, and multiplying that.

Dave Young:

Exactly.

Stephen Semple:

Multiplying it. Keep doing the thing you do and multiply that out.

Dave Young:

One of the worst things you can do is then turn to your marketing consultant, and you’ve maxed out in one city and the business owner says to us, “Well, you just got to figure out a way to get people to buy more stuff from me.” It’s like, “No, we can’t get people to need more ketchup. They’re going to run out of ketchup when they run out of ketchup. Go sell some ketchup down the road somewhere.”

Stephen Semple:

The next town down needs ketchup.

Dave Young:

Exactly. They’ve got to drive 15 miles to get their ketchup. Go help them.

Stephen Semple:

And this also applies in different ways and we can have a whole other conversation around online businesses, but it’s the whole point of find a formula, work the formula, multiply the formula, and find as many places as you can to run that formula.

Dave Young:

Yeah.

Stephen Semple:

Before you start looking at expanding into other businesses or other customers and things along that lines. That’s the lesson from Dollar General. They never deviated from that and they’ve become a massive empire that has got stores located with short distance drive of 75% of the US population.

Dave Young:

Thanks for listening to the podcast. Please share us. Subscribe on your favorite podcast app and leave us a big, fat, juicy, five-star rating and review at Apple Podcast. And if you’d like to schedule your own 90 minute empire building session, you can do it at empirebuildingprogram.com.

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