Dollar General takes greater slice of shrinking pie
What is a retailer to do when consumers are cutting back but its success depends on continued growth? For Dollar General, it means an increased focus on category management, planogram changes to highlight value purchases, a greater commitment to private label, and optimizing SKU assortment to either expand or cut back units based on customer demand.
In Dollar General’s earnings conference call earlier this week, CEO Rick Dreiling said, "As you look at the Nielsen numbers, they would actually tell you that the pie is contracting a little bit. And it’s hard to believe that people are eating less or using less detergent, but apparently they are at the end of the day. In fact, we actually have market research that talks about how people are trying to stretch one meal into two by adding more starch to the product."
Overall sales for Dollar General grew nearly seven percent over the last quarter with same-store sales increasing 1.5 despite the inclement weather that gripped the country for much of the period. The company reported customer traffic numbers and the average ring at its stores increased for the 25th straight quarter.
"Today, more than ever, given the economic environment that has lingered for quite some time, affordability has now become the focus of our core customer. What affordability means to our customer today is a tradeoff between price and quality that best fits their budget," said Mr. Dreiling. "At times, she is showing a greater willingness to compromise on quality or functionality to get a lower price point to stretch her money. We will never lose sight of our core customer and the trust that she places in us to help her stretch her household budget."
Dollar General, according to its CEO, made changes to 49 planograms to provide more affordable items across 90 percent of its departments. One example is its opening price point Smart & Simple private brand.
"Our customer recognizes that the brand is just as the name indicates and does not expect the product to be national brand equivalent like our portfolio of other private brands including Clover Valley, DG health and DG home," said Mr. Dreiling. "Smart & Simple allows us to further expand our product offerings and offer a good product at an opening price point that delivers affordability. This year alone, we will add approximately 40 new Smart & Simple products primarily across food, paper and home cleaning, including items from liquid dish soap to macaroni and cheese."
- Dollar General’s (DG) CEO Richard Dreiling on Q1 2014 Results (Earnings Call Transcript) – SeekingAlpha
- Dollar General looks to do a lot more with less – RetailWire
Is affordability more important to retail success today than it has been in the past? Are the steps currently being taken by Dollar General to achieve a competitive advantage sustainable in light of market realities?