Dollar General Looks for Big Growth This Year

Discussion
Feb 05, 2010
George Anderson

By George Anderson

When the economy took a downward turn, consumers
began shopping in dollar stores in greater numbers than ever before. Now,
as the economy begins to improve, many chains are looking to solidify past
gains and create new opportunities for growth with an aggressive real estate
push.

Last year, Goodlettsville, Tennessee-based
Dollar General opened 500 new stores and added 4,000 jobs. This year, the
chain is looking to expand its existing 8,800 store base by another 600 units
while adding 5,000 new jobs in the process.

“Dollar General continues to hire great talent,” said
Bob Ravener, Dollar General’s senior vice president and chief people officer,
in a press release. “We have exciting plans for 2010, which include expanding
our work force in many suburban, rural and urban communities. We are aggressively
recruiting job seekers who share a commitment to serving others and maintaining
Dollar General’s leadership as a destination for value.”

Discussion Questions: Do you see
dollar stores continuing to achieve the type of sales and profit growth
seen over the past couple of years? What chain(s) impress you
the most in this channel? Do you expect dollar store formats to evolve as the
economy improves?

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16 Comments on "Dollar General Looks for Big Growth This Year"


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Mark Johnson
Guest
Mark Johnson
11 years 3 months ago

I recently sat on a plane with a contractor from Dollar General. They were planning on adding 400-500 new stores this year, but the funny part is that they used to have 20 to 25 general contractors, but now they have like 8-10. It was an amazing growth per each individual. I am not sure how that can be handled.

W. Frank Dell II
Guest
11 years 3 months ago

No question the dollar store format has had a great run in this Great Recession with Dollar General and Family Dollar reporting good results. Excluding these two chains, the future looks rocky should the economy rebound. The shopping experience and merchandise quality is simply poor. It’s like shopping for Japanese goods in the 60s.

Dollar General has a store and merchandising plan, not just buying whatever is available. To achieve long-term gains will mean identifying these new customers and providing merchandise they want without losing their core customer base.

Gene Hoffman
Guest
Gene Hoffman
11 years 3 months ago

As reality slowly sets in and consumers begin to realize that there really isn’t a rainbow rising around the corner, there is continued opportunity for Dollar General and similar low-priced and distressed outlets.

If/when the economy improves sometime in the future, those consumers who downgraded their shopping practices will have gotten tired of schlepping around in Cheap City and will slowly and psychologically direct their shopping shoes toward more upscale stores.

This will cause the extensive chains of Dollar General-type stores to revise their presentations to keep from losing those customers who, hopefully, will be improving financially in the future.

Sandy Miller
Guest
Sandy Miller
11 years 3 months ago

Yes, Family Dollar and Dollar General and of course all formats will evolve and will be differentiated to better meet various shopper profiles.

Doron Levy
Guest
Doron Levy
11 years 3 months ago

Well I don’t think they have to worry about anything in the short term. The economy may be improving but I’m not sure consumers are seeing gains in their disposable income. Dollar can win on pure psychology of the market. Dollarama up north seems to be going aggressive on private label which must help with margins.

Overall, the category is going through some polishing up which may cater to other buying groups.

Steve Montgomery
Guest
11 years 3 months ago

Break a habit, create a habit, and reinforce the habit–that was the mantra drummed into me as part of my college education regarding shopper behavior. The economy helped the dollar format stores with the first two, but they will have to evolve to embrace the third. This will require moving from simply being low cost to being value driven. What this means for each company involved in this channel may (and probably will) differ. The economy will improve and when it does, low cost will not be enough.

Marty Walker
Guest
Marty Walker
11 years 3 months ago

Dollar General has built their brand through very specific and targeted real estate and demo decisions. They aren’t competing on the same grounds as mainstream retailers adjusting assortment, pricing and promotion to survive in this downturn, and they’re not living or prospering off of soccer moms seeking deals in the interim. They grew heavily before this economy and will continue after. They understand who they are as well as anyone in the marketplace.

morris hoover
Guest
morris hoover
11 years 3 months ago
Now that we have a new economic baseline, it is apparent that the value shopper is no longer the economic underclass–it is every housewife looking for gift bags, tape, batteries, zip lock, frozen veggies and the like. The merchandising model for the dollar channel will continue to improve as the fight for the consumer dollar continues. The big players in the dollar channel understand that even with this recession (transformation in correct economic terms) consumers do not want to spend foolishly on items that have a disposable value; that is center store. The future will be tempered by looking at two stories of expansion; Starbucks (overstored) and Trader Joe’s (understored). Both have valuable lessons to be learned with some that will be repeated and others that will not. Overall, the dollar channel is here to stay and will continue to grow at a measured pace. It will take on merchandising as a serious marketing function as well as building better planograms that entice the consumer to spend more time (and buy more) in increasingly sophisticated… Read more »
Bill Bittner
Guest
Bill Bittner
11 years 3 months ago
At the same time Dollar General is looking forward to a strong 2010, JP Morgan has downgraded their expectations for Dollar Tree sighting the loss of momentum from macro economic factors. Two factors have made the dollar store format successful recently. On one hand, manufacturers were caught with overstock that they had to get rid of somehow. Secondly, consumers became willing to try new products or even lower their quality standards in order to save some money. An economic turnaround is going to impact both of these. Manufacturers will be very cautious going forward as they avoid future inventory buildups. Consumers will soon begin feeling better and be willing to go out on a limb in order to purchase the products they can now again afford. I am not sure how this will impact national brand sales. Consumers may find they are able to move up the quality scale by purchasing an upscale private label. This presents an interesting dynamic between the national brand on sale in a dollar store and the premium private label… Read more »
Rick Boretsky
Guest
Rick Boretsky
11 years 3 months ago

I think the success of this format goes in cycles. We had Nickel and Dime stores and those all went away, and now we are back with dollar stores. Great shopping for certain products, but 90% junk. People will tire of the model/merchandise. Over time, there will definitely be a contraction in this market but nonetheless, the format will be around for a long time to come.

Justin Time
Guest
11 years 3 months ago

Family Dollar is a really cool store. It reminds me of the great variety stores of another era, G.C.Murphy and S.H. Kress, except for their hot food areas and candy counters.

Now that they honor major credit cards, Family Dollar can only get better. Value, convenience, selection will keep FD in the spotlight for years to come.

Arthur Rosenberg
Guest
Arthur Rosenberg
11 years 3 months ago

This economy is a long way from back to normal. There are many questions still confronting the recovery and jobs is at the forefront. The federal government has even gotten around to making jobs priority number one.

Most of us know professionals who are out of work. I suspect most people have family members and friends who are looking for work or have virtually given up.

With these reminders all around, I would think dollar stores can continue to help consumers grow their thrift-based shopping habits.

jeff webber
Guest
jeff webber
11 years 3 months ago

The Dollar Store chain model will continue to thrive and expand nationally as long as the economy has difficulties.

However, if and when the day arrives that our domestic retail climate returns to a semblance of its former status, then these chains (especially Family Dollar and Dollar General) can adjust some of their purchasing to include better goods (still with great value) at higher prices than are now offered–and yet still be able to work on lower margins than the traditionally more profit-oriented Department/Specialty chains.

Dollar Tree has a rougher business course, since one dollar purchasers/consumers are indeed bargain-hunters and world inflationary pressures (costs of manufacturing abroad) and monetary exchange rates will cause either the product itself to rise in price or the foreign producers will tend to cheapen the quality of the articles. This reality has become inevitable.

Michael L. Howatt
Guest
Michael L. Howatt
11 years 3 months ago

Looks to me like dollar stores are thinking very short term, capitalizing on the current state of affairs. If they want to keep those stores open for longer than say 5 years they will need to upgrade their merchandise–and I’m not sure they won’t get significant push back from manufacturers. My sense is that they will be closing those stores as quickly as they have been opened.

Kai Clarke
Guest
11 years 3 months ago

This is a great time for the dollar stores as they expand their reach, increase their size and grow. As the economy gets better, the customers they have reached out to will still continue to shop at the dollar stores as they recognize the thriftiness that they offer, and savings, for years to come. Fear of another loss or failure of the economy will keep these customers in-place as there is more and more growth.

Scott Knaul
Guest
Scott Knaul
11 years 3 months ago

Dollar stores will do quite well. I think the general public has learned that there is a better selection in these stores than they would have originally guessed. The trick will be how they hold onto the customers they now have when the economy rebounds.

I know both Dollar General and Family Dollar are working on programs to improve the in-store environment to keep the value of the experience high and keep those clients coming in. It’s not that dissimilar to when Walmart and Target grabbed market share from Macy’s and the like.

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