Schafer: Why Dollar General's store in downtown Minneapolis could be a good thing

Dollar General might have taken the place of Walmart as a retailer thought to both serve its customers well yet make communities worse.

For those inclined to dislike this company, and there are lots of you, it can't be a good sign for downtown Minneapolis that a new Dollar General store is coming to Nicollet Mall.

In fact, it is promising.

A DGX store is coming, not one of Dollar General's ubiquitous, low-cost convenience stores. And here a major retailer apparently thinks a vibrant Minneapolis downtown full of office workers and a growing residential community will be there when the store opens next year.

The DGX is a new concept for Tennessee-based Dollar General, more like a micro Target store than the kind of Dollar General convenience stores that dot the country.

DGX stores are part of a Dollar General strategy to better serve the millennial generation, which wants different things than its older customers. There's a DGX store in the Crossroads Arts district of Kansas City, Mo., Cleveland's Playhouse Square district and other big-city downtowns.

This is a new concept for Dollar General as even conventional dollar stores haven't been around that long, at least not in the kind of volumes they do these days. They got their name in part because a lot of products really were priced at a dollar.

With a store count closing in on 17,000, and at least 163 stores here in Minnesota at the end of its last fiscal year, Dollar General has proved its strategy of selling everyday items at cheap prices, banking on making money by running with a lean staff in drab, inexpensive buildings.

Dollar General prices are often compared with Walmart's, and while Dollar General products often look cheaper because they're often in smaller packages, generally the prices seem roughly comparable.

Dollar General focuses on high-volume packaged food and household items, what the competing groceries call center store items. Customers coming every week to Dollar General rather than their local grocer take the most profitable sales out with them, and that certainly can lead to the local grocery operator closing down.

So what's the problem? Walmart, McDonald's and other iconic American success stories put thousands of American competitors out of business, and people have mostly come to accept them as great companies.

One knock against Dollar General is that its conventional store, with about 7,500 square feet of selling space, is a terrible substitute for the grocery stores it pushes out of a market.

High-quality meats, dairy and other fresh foods will be much harder for people to find once their conventional grocery store is gone.

Another is that Dollar General's model of operating with a skinny staff in low-income communities means these stores often attract a lot of crime.

Maybe nothing galvanized critics quite like a 2017 story in the Wall Street Journal that described how Dollar General could keep growing in a country that rarely seems to lack stores.

"The economy is continuing to create more of our core customer," is the way its CEO put it then.

That customer lives in a household of less than $40,000 in annual income. What the CEO really did here was describe the fabulous (for the company) trends of greater income inequality along with gradual rural decline.

In other words, the countryside is slowly emptying and the people who remain have tight budgets.

When people in the Twin Cities jumped online to complain about the Dollar General's planned new store in Minneapolis, it was clearly this store and its role in poor communities that bugged them.

Of course, a conventional dollar store in downtown Minneapolis wouldn't succeed.

A DGX is a smaller store, slated to be about 6,000 square feet when one opens next year in Minneapolis. It will be in a long vacant, ground-floor space at the corner of 5th St. and Nicollet Mall, near the corporate headquarters of Xcel Energy.

Its building, called the Andrus, dates from the late 1800s and had been acquired in 2017 by Chicago-based real estate firm TriCoastal Group along with a financial partner.

The 10,000 square feet of leasable space on the ground floor was always meant for retail, a plan that seemed "more doable" back then than it did in 2020, said TriCoastal Managing Principal Brian Lipson.

Lipson's team caught wind that Dollar General was looking for potential sites in that part of downtown Minneapolis and pursued a lease in 2019.

The DGX deal was finally signed only after the pandemic had rolled around the world and downtown Minneapolis had emptied out of office workers.

The new store is a bet on workers coming back.

Lipson called DGX a neighborhood market, more grocery than convenience store but nothing like the Whole Foods Market a few blocks away that's several times larger.

The new store will carry grocery items and fresh food, but also home goods and personal care products, altogether "more than you think could fit in 6,000 square feet," Lipson said.

As he learned, Dollar General looks for DGX sites that are near the edge of downtown business districts, serving office workers as well as people living nearby, like in the nearby North Loop in Minneapolis.

A quick call to Steve Cramer of the Minneapolis Downtown Council helped put this matter into a little better perspective.

We, after all, are talking about one corner grocery store.

A new store of almost any kind is a nice thing to have in downtown Minneapolis.

"Is it a home run? Is it an Apple Store? No," Cramer said. "But it's a solid, stand-up double."

lee.schafer@startribune.com • 612-673-4302