• by Sarah Mahoney , June 17, 2011

Bargain hunters, who discovered the dollar-store format in droves during the recession, haven't lost their taste for the low prices and convenience this format offers: Dollar General says affluent shoppers continue to be its fastest-growing customer segment.

In a presentation at William Blair's Growth Conference that was also webcast, Rick Dreiling, Dollar General's chairman/CEO, told investors that 50% of the Goodlettsville, Tenn.-based chain's new shoppers come from non-core higher-income households, with 22.4% of customer households making over $70,000 annually. In fact, shoppers with incomes of $70,000 or more remain its fastest-growing demographic.

And while low prices are a major part of the attraction, he says, with 24% of the items in each of its stores selling for $1 or less, convenience is a critical and growing part of the brand's appeal. "We've made a radical shift," he says, "and we proudly sell both national brands and private-label, focusing on everyday necessities at compelling prices. We have a broad selection, but not very deep."

Prices are typically 41% cheaper than those at drug stores, 22% cheaper than grocery, and on par with those found at supercenters. "But with an average size of 7,100 square feet and cost parity with supercenters that are 125,000 square feet, we are more convenient," Blair says.

He also says the chain has refined its advertising strategy, "using our store as the communication tool," and is implementing a new social media program to maximize its 750,000 Facebook fans.

Despite consumer fatigue with a tough recession and its lingering aftereffects, he adds, customers continue to trust the chain's everyday low pricing, which is what drives loyalty. (In 2010, its share of wallet growth was 4.3% with existing customers.)

In the months ahead, Blair says, the chain plans to gas up its expansion plans, with 625 new stores and 550 remodels in 2011 and a goal of increasing overall square footage by 7% per year. He says it sees 11,000-plus new opportunities, including 8,000 in its existing markets, and the remainder in such new markets as Nevada, New Hampshire, Connecticut and California.

Earlier this month, the company reported a 10.9% gain in the first quarter of its fiscal year to $3.45 billion, driven by a 5.4% rise in same-store sales.