Dollar General Goes Online

Discussion
Sep 08, 2011
Tom Ryan

Albeit 16 years after Amazon.com was first launched, Dollar General will finally introduce e-commerce capabilities on its website today in a bid to provide more convenience for consumers.

"Dollar General is excited to meet the growing demand for online convenience and value," said Rick Dreiling, chairman and CEO, in a statement. "We have streamlined the online shopping experience, giving customers what they need, as well as what they want, 24 hours a day, seven days a week, 365 days a year."

On its second-quarter conference call last week, Mr. Dreiling said the website will initially offer over 1,000 of its current SKUs to customers "who like many of you may not have a convenient Dollar General," including those living outside its 35-state market area.

"We plan to sell single items as you would find in our stores as well as larger quantities that we stock in our stores. And from time-to-time, we’ll also feature limited quantities of special buys," said Mr. Dreiling. That includes unique items only available at dollargeneral.com and not in stores.

Asked by an analyst to gauge the size of the e-commerce opportunity, Mr. Dreiling said he’d have to wait until it’s been up and running for awhile. He said, "This is brand new for us. We do know that there has been request for it. We do know there is demand for it, but I just don’t know enough yet about what it’s going to generate. And with the world of social media today, I mean, it’s a great hookup for us now."

While its largest competitors, Wal-Mart and Target, started conducting e-commerce operations in the nineties, its nearest competitor, Family Dollar, doesn’t offer e-commerce. Dollar Tree added e-commerce in April 2009 in part because customers were looking to buy in larger quantities not always available at each store. It also offers free shipping when a customer chooses to ship their order to one of Dollar Tree’s stores.

Discussion Question: What do you think of the e-commerce opportunity for Dollar General and other dollar store operators?

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18 Comments on "Dollar General Goes Online"


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Bob Phibbs
Guest
9 years 8 months ago

Maybe I’m missing it but I haven’t heard of dollar store customers tweeting that they need to shop online.

Dan Berthiaume
Guest
Dan Berthiaume
9 years 8 months ago

It may be limited as shipping and handling charges and waiting for delivery cut into the two key value propositions of a dollar store retailer: cost and convenience. Free ship to store or larger orders can mitigate these issues, but dollar store retailers will probably not have the success with e-commerce that retailers in other verticals have experienced.

Liz Crawford
Guest
9 years 8 months ago

I am not sure that the dollar store audience is looking for an ecommerce opportunity to buy. It seems to me that most dollar store buys are opportunistic and somewhat spontaneous.

The shoppers who are looking to buy staples online are in a different psychographic. Online replenishment buyers are a pretty deliberate bunch. Will they switch to Dollar General, from say, Amazon, Stop & Shop or Walmart.com? I doubt it. The reason is that online purchasing makes more sense with a higher volume/lower price per unit basket. On the other hand, dollar stores sell more single items with low absolute price points. This seems to be a different consumer purchasing model.

Ian Percy
Guest
9 years 8 months ago

We seem determined to take the fun out of everything. Maybe some people want to buy cases of Rice-A-Roni and for them this is great. But it’s the ‘in-store experience’ that makes all ‘dollar stores’ fun. Seeing what you can get for a buck when you had neither intention nor need is all part of the ride. Marveling at how certain things could possibly be produced for such a low amount and have people still making a profit has got to qualify as the Eighth Wonder of the World. I never get tired of it. Will online shopping do that for me? Nah.

Ryan Mathews
Guest
9 years 8 months ago

I’d have to see a profile of their demographics to know for sure, but it would be interesting to what percentage of their shoppers are online.

It will also be interesting to see what happens to the price point. I can’t see why anyone would want to pay shipping for an item that only costs $1.00, but maybe that’s just me.

Dick Seesel
Guest
9 years 8 months ago

Granted, dollar stores offer more edited assortments than their larger brick-and-mortar competitors…but a 1000-SKU assortment doesn’t sound very impactful. The sort of opening prices and inexpensive commodity goods carried in a Dollar General store may not get the attention of the online shopper looking for extreme value.

It would also be interesting to know more about the sort of IT and infrastructure spending needed to make an e-commerce site work, and whether Dollar General has made that investment. Time will tell, but this move feels like a concession by DG rather than a genuine sales driver.

Tony Orlando
Guest
9 years 8 months ago

How is shipping going to affect the actual price, and still turn a profit? Dollar General runs on a spartan environment in their stores to keep costs down, and if they have to ship these cheap goods to homes, how will it turn a profit? We’ll see.

Doron Levy
Guest
Doron Levy
9 years 8 months ago

Yet another online presence from a discount retailer. You have to wonder what took them so long. Will it work? The online market is so saturated with more of the same that DG will have to come up with something new and different to really make a splash. There site is nice, clean and easy to shop but nothing really stands out. How are they they compete with the Walmart.com’s and Target.com’s of the world?

Charles Billups
Guest
Charles Billups
9 years 8 months ago

I think the real point is being missed — this is really primarily a marketing tool. Dollar General has moved beyond the fray of the “dollar hunt” to carry name brands and its own private brands.

The site is well done and features branded promotions and information. Looking at this as an online e-commerce play only misses the forest through the trees. It represents another connection point with a shopper who will buy in-store or just maybe online.

Ben Ball
Guest
9 years 8 months ago

Hmmm…tough one!

Knee jerk reaction is to say “not for Dollar Stores” — but we have said that about so many other things in the past (food, frozen food, fresh food, urban locations) that we have to ask “but why not?”

Internet access and usage by the target shopper is no longer an issue as US penetration is almost universal. Willingness to shop online, even for smaller purchases/convenience items, is not the barrier it once was — although I think this will still be an issue for the consumables categories if DG tries to offer those online.

The opportunity to reintroduce and expand the “treasure hunt of bargains” concept of the original dollar store may be the opportunity. Dry goods, hard lines and housewares could all be candidates for a “let’s see if we can find it cheaper at DG’s website” addition to online shoppers normal stops at Amazon and eBay.

John Karolefski
Guest
9 years 8 months ago

This is just another way to serve shoppers, so why not try it? If it works, fine; if not, stop it. Are we really supposed to believe that a critical mass of frequent shoppers in Dollar General are asking for e-commerce? I don’t.

Matthew Keylock
Guest
Matthew Keylock
9 years 8 months ago

I’m all for test-and-learn, so I don’t see this as bad…although I don’t have insight into the investment being made!

Closing off questions like “can online work for the channel and our brand?” with either a “Yes” or “No” is also very valuable in itself. If it works then it could be a great competitive advantage.

Like many commentators I struggle to see the online proposition connecting with their offline shoppers due to the assumed delivery charges and delivery time. However, if it provides a new value channel for existing online shoppers and/or a treasure hunt option, then it could gain momentum.

It will be interesting to follow their progress.

jeff fernandez
Guest
jeff fernandez
9 years 8 months ago
This is most likely a waste resources for a number of reasons. 1) Most Dollar General customers do not have high speed internet or a smart phone necessary to load the website.2) The DG customer base cannot afford to pay for shipping which would be necessary to compensate for the investment of DG. 3) The current selection of DG is not compelling enough to bring in new customers from the larger competitors; Amazon.com, Drugstore.com, Costco.com, Target.com.4) DG would need to provide better quality and a much larger selection of brands available to draw new customers that are currently purchasing online. While there is an opportunity to sell B2B, the profit margins would be very thin.5) DG would have to deliver to the customers home/office for a reasonable fee (free). Current prices of fuel impact any potential profits. They currently do not have the back-end set up to accommodate this undertaking.6) If DG used the website to target customers with current deals/circulars/specials, it would be successful, but to think that they can compete with Amazon.com is… Read more »
Mike Spindler
Guest
Mike Spindler
9 years 8 months ago

Why not DG?

I doubt their initial foray is their eventual plan. You either play in this market or cede to others. They do have 3,500 drop-off and pickup locations, once they figure out that is an asset.

Ed Rosenbaum
Guest
9 years 8 months ago

I am thinking this has to be directed more to the non-traditional dollar store customers, those who buy in larger quantities. If I am correct, this is a limited chance to increase the gross profit line. If I am not correct, then I wonder who this is focused at? Certainly not the everyday dollar store shopper.

Carol Spieckerman
Guest
9 years 8 months ago

Scale opportunity? Exponential. Traditional e-commerce? Not so much.

Walmart has what Dollar General should want — a robust site-to-store platform that has the potential to turn every location into a multi-channel convergence point. Dollar General has what Walmart wants — thousands of efficient, low rent, small format locations in underserved areas. If Dollar General shifts its attention from shopping carts to site-to-store, and should they then decide to join the “marketplace” mayhem (a la Best Buy), look out!

Gene Detroyer
Guest
9 years 8 months ago

This is a huge opportunity for DG. Online offers their customers everything that the store offers and more. DG can expand their SKUs at very little cost and offer the same value proposition. Their customers can shop it opportunistically. Everyday if they want. Consider a regular email from DG telling you what is new and priced right.

From a business point of view DG experiences incremental revenue at little or no incremental cost.

Camille P. Schuster, PhD.
Guest
9 years 8 months ago

How do the economics of shipping charges work for items priced at a dollar? Do consumers want to pay the shipping charges? If shipping charges get added to the price, does Dollar General lose its price advantage? Is real value being provided here that consumers are ready to pay for?

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