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- Dollar General is a low-cost retailer with 17,000 stores, mainly in rural communities.
- In July, it hired former McKinsey consultant Dr. Albert Wu to be its first chief medical officer.
- Analysts and experts laid out three strategies the chain could pursue in healthcare delivery.
The next frontier of healthcare could be marked by a yellow and black sign.
On July 7, the discount retailer Dollar General unveiled early plans to boost its customers' access to healthcare by expanding the supply of healthcare products, such as cough and cold medicine, on its shelves.
The company, known for its stores across large swaths of rural America, predominantly in the South and Midwest, also hired Dr. Albert Wu, a former McKinsey consultant, to be Dollar General's first chief medical officer. The company has charged Wu with building a network of affordable healthcare services.
The discount retailer carries everything from stuffed animals to clothes to craft supplies, and it hasn't been quiet about its ambitions to become a one-stop shop for far-flung communities. Tapping into the $3.8 trillion healthcare industry could help Dollar General do just that.
Just how far into healthcare Dollar General plans to go remains to be seen. Some healthcare experts saw Wu's hiring as the company's attempt to blunt criticism about the lack of healthy options in its stores. They compared it to Dollar General's push to add fresh produce after Wall Street doubted its chips-and-soda approach to nutrition.
But if Dollar General is serious about helping its communities, it could usher in a new era of healthcare access for many Americans across the country, experts said.
The $55.6 billion chain boasts a fleet of 17,000 stores, and it's growing rapidly. It added 1,000 new stores in 2020 and has plans to open another 1,050 this year. The company said 75% of the US population lives within 5 miles of a Dollar General.
The sheer volume of Dollar General locations could displace the center of gravity in the fight to win over rural Americans as the place to go for their health. Dollar General could also benefit patients who live in areas where primary care or specialists are hard to come by. By offering over-the-counter medications, online prescription ordering, or telemedicine consultations, Dollar General could improve America's healthcare system for people who historically have been left behind.
In a statement, a Dollar General spokesperson said hiring a chief medical officer, enhancing the healthcare products it offers, and planning to provide produce in 10,000 stories in the next few years were evidence of the company's work to improve the availability of health products in the communities it's in.
"Our extensive store footprint enables us to reach rural communities often underserved by other retailers and the existing healthcare ecosystem ," the spokesperson said.
Dollar General could have an advantage over other retailers in tackling rural healthcare. Walmart, which has also been pushing deeper into healthcare, has historically run into issues reaching remote customers. Experts mentioned the ill-fated rollout of Walmart Express locations that were supposed to directly compete with Dollar General's iron grip on those markets.
"It's worth remembering that everyone talks about how great Walmart's logistics and operations are, and they got their a---- handed to them by Dollar General in these really remote areas," said Neal Khosla, a healthcare entrepreneur. "To me, that's a fascinating position to be in. It's one of those things that people don't talk about enough."
Insider spoke with four analysts, experts, and healthcare insiders to learn the different ways in which Dollar General could take on the healthcare industry. They laid out three distinct strategies the chain could pursue.
Low-cost, over-the-counter medications could bolster Dollar General's bottom line
Dollar General's move to add more over-the-counter medications and everyday health products is a logical first step, analysts said. The chain already offers some healthcare staples, including products for dental hygiene, digestive care, and over-the-counter pain relief.
Adding even more healthcare products for purchase further ties the customer to Dollar General and keeps them coming back, said Zain Akbari, a Morningstar analyst. It's also a way to help rural customers get their staples faster and more conveniently, instead of having to drive to the nearest town with a Walmart or big grocery store to stock up.
"They are the only game in town for so many of their communities. It's kind of an open opportunity to fill unmet needs in those areas," Akbari said.
Corey Tarlowe, an analyst at Jefferies, wrote in a research note in July that offering more healthcare products should drive sales, traffic, and profitability for the discount chain, as well as help it steal market share for drugstores, which have prices that are roughly 40% higher than Dollar General.
A large portion of Dollar General's customers likely don't have health insurance or great access to healthcare, said Karen Short, a Barclays analyst.
"To the extent that they can offer lower price points or any type of information flow for that customer demographic, it's absolutely a value add," she said.
In-person or online pharmacy partnerships could alleviate inequities but come at a cost
Dollar General could also provide more traditional pharmacy services such as prescription fulfillment and delivery, analysts and experts said.
Many Dollar General customers live in "pharmacy deserts" where the nearest place to fill a prescription is a significant drive away.
But getting into the pharmacy business is tough. Employing a pharmacist is expensive, and a small Dollar General store may not have enough space or generate enough income to support one, said James Gardner, a retail-health consultant. A virtual pharmacy may make more sense, he added.
"A viable model for them would be an online pharmacy, where you're not offering pharmacy per se in your stores, but you've got a white-label pharmacy business that's either delivering to stores for pickup or delivering to people's homes — avoiding that 30-minute drive to the local CVS or local Walmart," Gardner said.
Dollar General already has a partnership with GeniusRx, an online pharmacy founded by Randy Parker, the founder of the telehealth company MDLive. The partnership allows people to get medications delivered to their homes for free, Dollar General's website said.
Operating a fully functional pharmacy, whether in-person or online, could create a strain on the business because of the costs and complexity associated with operating a pure healthcare business, Khosla said. The more Dollar General leans into bona fide healthcare services, the more its business model would depend on its success in healthcare.
"They're going to have to decide how much they really want to be in healthcare," Khosla said. "The more you get into clinics and pharmacies, the more it's a real business — more so than just offering over-the-counter."
Primary-care clinics aren't likely, but Dollar General could wade into telemedicine
Analysts and other experts doubted that Dollar General would follow Walmart's lead and build primary-care clinics.
For one, Dollar General stores and parking lots are small, so there isn't much space to work with. Dollar General locations are traditionally 7,300 square feet, while Walmart supercenters average 178,000 square feet, the companies' financial documents showed.
Dollar General also leases most of its stores, so reconfiguring them or adding to them may require permission. Walmart, meanwhile, owns its real estate.
"They don't have square footage to allocate," Short said. "They lease all their stores, they're small-format stores, and they don't fill prescriptions. So their approach can't even come close to what Walmart is thinking."
Still, the chain could wade into the business of providing care in other ways.
Akbari said he could see Dollar General holding rotating flu-shot or COVID-19 vaccine clinics, where it administers shots for a limited time at certain stores rather than build a permanent presence, like CVS or Walgreens.
Dollar General has already served as a site to get a COVID-19 test in some states. For example, in June the Virginia Department of Health said it was partnering with the chain to see if it could boost access to tests for vulnerable communities. The stores have also been floated as a means to distribute COVID-19 vaccines more equitably.
The chain could also sidestep the issue of limited space by offering its customers access to virtual care.
"I don't think there's any reason why someone like Dollar General couldn't partner with an Amwell or Teladoc to offer a white-label telehealth solution. Or like Walmart did, they could acquire a telehealth provider," Gardner said.
On its website, Dollar General touts partnerships with Higi, a blood-pressure machine it's added to some stores, and Babylon, a telehealth provider that has invested in Higi.
A Babylon spokesperson said the telehealth company began offering its tools to Dollar General customers across 17 states in August 2020. Babylon also offers free virtual appointments for certain Dollar General customers in Missouri.
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