The entire strategy for dollar stores (Dollar General, Family Dollar, Dollar Tree, etc.) is to out price their local competition - hence why yours is right next to a grocery store.
They carry higher-profit margin goods, which are mostly canned and processed foods, but ditch the lower-margin items like fresh produce. Grocery stores can't compete with them unless they also ditch their healthier foods.
There are entire communities in the U.S. who don't have access to fresh produce but do have access to five dollar stores. There was an interesting planet money podcast on it called "Dollar Stores vs. Lettuce".
I would argue that Dollar General has morphed itself away from the traditional "dollar store" model and is focusing much more heavily on the "general store" idea of old.
Sure you can get cheap stuff there, but not significantly cheaper than the similar products that a grocery store would have.
Their edge is that they are open later and have more of a focus on stuff that you are likely to need last-minute.
For example, when our kids were still wearing diapers, Dollar General was a typical stop as soon as we got to my mom's house for the weekend.
Similarly, if you're out of shampoo, toothpaste, etc. Dollar General is going to have a better selection than the grocery store.
Need a birthday card? Dollar General.
My mom likes to go there for cheap outfits for the grandkids. We don't get clothes there, but they have a decent selection.
In my experience Dollar General is an asset to a small town. It complements the other businesses rather than driving them out. Contrast to Walmart, which will do its best to kill small business.
I can't recall which episode (maybe the one you linked but there are others) but one NPR Planet Money had a local shop owner complaining that Dollar General even stocks SKUs unavailable for sale to other stores due to purchase agreements, such as intermediate sizes of canned food at a more attractive price point.
They carry higher-profit margin goods, which are mostly canned and processed foods, but ditch the lower-margin items like fresh produce. Grocery stores can't compete with them unless they also ditch their healthier foods.
There are entire communities in the U.S. who don't have access to fresh produce but do have access to five dollar stores. There was an interesting planet money podcast on it called "Dollar Stores vs. Lettuce".