Dollar General Prioritizes Growth
Company lures customers with location, merchandising and inventory.
Apr 18, 2019
GOODLETTSVILLE, Tenn. – While other discount retailers are struggling, Dollar General reported $25.6 billion in revenue in 2018, according to Digiday.com.
How did the chain manage that result? Dollar General’s 15,432 stores are often located in areas away from competitors, and management has made good in-store experiences a priority. The chain’s merchandising strategy aims for a look and feel that’s inviting and easy to navigate, and technology is used to foster efficiency. Dollar General also is remodeling and renovating stores. For this fiscal year, the company plans to build 975 new outlets and carry out 1,000 store remodels.
“Their business model is nimble and focused on what customers want; that’s made them a very popular destination not just for low-income customers, but lots of other Americans,” said Neil Saunders, managing director of GlobalData Retail. “They are a savvy operator, and their growth has been quite phenomenal.”
Dollar General’s merchandising strategy shifted approach after the company was acquired by private-equity firm KKR in 2007. At the time, the company was struggling and had $380 million in debt. It went public in 2009.
“Prior to KKR, Dollar General was, as we refer to it, ‘over-SKUed and under-assorted,’ meaning they had too many versions of the same product,” according to Brandon Fletcher, an analyst with Bernstein. The company then focused on eliminating redundant products and replacing them with higher-margin and private-label items, he added.
Dollar General attracts shoppers beyond the low-income customer segments because its inventory includes value items from national brands that aren’t necessarily at the strict $1 price point. The company also focuses on store designs that are easy to navigate for customers, a point of differentiation from competitors, and it has introduced a scan-and-go payments app called DG GO! to 250 stores since its launch last year.
Last month, Todd Vasos, CEO of Dollar General, told investors that the chain’s app currently has more than 140,000 downloads and 25,000 monthly active users. A feature of the app that encourages use is a cart calculator to help shoppers stay within their budgets and optimize their shopping dollars.
Still, Dollar General has competition. Zain Akbari, an analyst for Morningstar, believes that if large brands, such as Walmart or Amazon, can figure out how to quickly deliver products to discount shoppers in safe and cost-effective ways, there could be some competitive pressure on Dollar General.
Meanwhile, Dollar General is seeking e-commerce models to inspire its evolving strategies. It’s dabbling in direct-to-consumer offerings, including a subscription-based shaving product line called DG Shave Crew reminiscent of the Dollar Shave Club, and rolling out a buy-online, pickup-in-store option later this year.
