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September 10, 2021

The next health care disruptor: Dollar General?

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    Noting that a majority of its stores are located in "health deserts," Dollar General CEO Todd Vasos announced Wednesday that the organization is planning to offer more health care products and services to its customers—but some health advocates suggest this expansion could instead exacerbate existing issues. 

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    Dollar General's potential impact on rural health

    According to Vasos, about 65% of the company's stores are located in "health deserts," or areas where residents must travel long distances for medical care. That equates to roughly 10,000 of the organization's more than 17,000 stores—many of them in small towns and rural communities—where consumers may not otherwise have ready access to health care, CNBC reports.

    Currently, around 60 million people—or about one in five Americans—live in rural areas and depend on local hospitals for health care, NBC News reports. Exacerbating the issue, according to the Cecil G. Sheps Center for Health Services Research, is that 181 rural hospitals around the country have closed since 2005, including 20 in the last year due to the pandemic and other financial pressures, a situation that has made it increasingly difficult for many people to access necessary medical care.

    In response to these conditions, and to address the health care needs of its customers, Vasos said the company is planning to offer more health care products and services in the future.

    "Our goal is to build and enhance affordable healthcare offerings for our customers, especially in the rural communities we serve," he said.

    The company's health care efforts to date

    Dollar General has already taken several steps to expand into the health care industry—both through products and services, CNBC reports.

    Earlier this year, the retailer worked with several states, including Michigan, South Carolina, and Indiana, to host community vaccine clinics in its stores. And in June, Dollar General partnered with the Virginia Department of Health to offer no-cost coronavirus testing at its stores.

    The company has also been in talks with CDC to create a formal partnership and turn stores into Covid-19 vaccination sites, although neither have announced official plans yet, CNBC reports.

    Then, in July, Dollar General hired Albert Wu, who previously worked at McKinsey & Company, as its first CMO and announced that it would add health products, such as cold and cough medicine and dental supplies, to store shelves.

    The company has also indicated that it will offer telemedicine, prescription pick-up and delivery, and mail-order prescriptions in the future, NBC News reports.

    "While it's in its infancy stages, we really have an opportunity to grow that health-care side of the business—not only products in the store, but services," Vasos said.

    New offerings could improve Dollar General's reputation—or cause controversy

    According to CNBC, Dollar General has been criticized in the past for contributing to "food deserts," where customers are not able to access affordable nutritious foods, such as fresh fruits and vegetables. Specifically, some lawmakers have said the company's stores offer few healthy food options and that it has pushed out local grocers that would have offered a wider variety of food.  

    However, in recent years, Dollar General has attempted to address this criticism by expanding its food selection. The company now offers meat and produce in more than 1,300 of its stores and has said it may expand these options to up to 10,000 stores nationwide.

    In addition, Vasos said the company's new health care offerings will allow it to address health deserts, which he suggests may be an even bigger problem.

    "There's as many if not more health/medical deserts in rural America as there are food deserts," he said. "We believe we have the ability to service the consumer in a lot of these instances where she today has to drive 30, 40 minutes to get basic health care."

    Still, NBC News reports that several health advocates have raised concerns about whether the company's expansion into health care could potentially exacerbate health deserts.

    "This move to expand health care products will chip away at the market demand that full-service pharmacies and grocery-based pharmacies need to survive," Kennedy Smith, a senior researcher with the Institute for Local Self-Reliance, said. "Dollar store staff simply do not have the medical or pharmaceutical training and expertise to provide customers with responsible guidance in choosing over-the-counter medicine and medical supplies."

    On the other hand, however, Jefferies analyst Corey Tarlowe said Dollar General's prices tend to be 40% cheaper than drugstores, 20% cheaper than grocery stores, and in line with mass-market retailers, CNBC reports. By focusing on health efforts, Tarlowe said Dollar General is "further solidifying the company's moat" as a leader among value and discount retailers. (Repko, CNBC, 9/8; Repko, CNBC, 7/7; Miranda, NBC News, 8/27)

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