How does Dollar General stay in business?

[Skammer]

I wish I had seen this thread earlier.

In October of last year, I left my manager-level job at Dollar General corporate headquarters in Goodlettsville, TN after almost 7 years working there. Now, I was in HR, not Store Operations, but I can confirm/correct or deny most of the information in this thread and answer questions anyone might have.

To start with, when I joined DG in early 2009, they had about 7200 stores. All DG stores are company owned, no franchises. The buildings are leased. When I left last year they had well over 12,000 stores and were planning to open 900 this year, so they are probably at or near 13,000 by now. Really phenomenal growth.

They are most densely located in the south and southeast and Midwest parts of the country, but have been aggressively expanding out west (CA/WA/OR) and in New England. In 2014/2015 they attempted to purchase, then take over, Family Dollar but lost that bid to Dollar Tree; so they have put even more focus on rapid expansion to remain the segment leader in discount retail.

What else? Contrary to what was asserted above, margins on most products are very small and they control costs by aggressively controlling costs (both in terms of merchandise and labor).

They do not sell odd-lot or overstock items - they sell regular brand names, although their selection evolves over time like any other store. They also usual focus on smaller, low-cost packages to appeal to their cost-sensitive consumer base. They are the leading retailer of many popular brands (Unilever, Kraft, Proctor & Gamble, etc.) They also push their private labels, of course, which offer both lower cost to the customer and higher margins for the company. In recent years they’ve added alcohol and cigarettes to their shelves to bring in more traffic, which has largely been successful.

I’ll go back through the thread to see if there are any other specific comments or questions I can address.

[Skammer]

Okay, having read the rest of the thread, I noticed that I didn’t address store location and density. DG general aims for low- to medium- income areas. You’ll find at least one in almost every small town in the south, and in higher density areas they can be as little as two miles apart (within walking distance for potential customers). I used to have a 13-mile commute to HQ and would pass 5 stores on my way.

DGs are also located in lower income urban areas, but not as many. They usually have higher operating costs due to higher crime and higher staff turnover.

[Accidental_Martyr]

@Skammer

They do not sell odd-lot or overstock items - they sell regular brand names, although their selection evolves over time like any other store. They also usual focus on smaller, low-cost packages to appeal to their cost-sensitive consumer base. They are the leading retailer of many popular brands (Unilever, Kraft, Proctor & Gamble, etc.) They also push their private labels, of course, which offer both lower cost to the customer and higher margins for the company. In recent years they’ve added alcohol and cigarettes to their shelves to bring in more traffic, which has largely been successful.

This seems to be one of the main errors/misconceptions that some posters here have about Dollar General. Thanks for sharing your info.

[Cub_Mistress]

IME, DG does occasionally sell odd lot/overstock stuff. Several years ago I found two incredibly beautiful Craftsman-style Tensor brand lamps there that I designed a room around.

[Skammer]

Coincidentally, DG released it’s quarterly earnings report yesterday. It handily beat the street’s earning estimates, although fell slightly short on sales. Gross margins were over 30%, a lot of that due to lower transportation costs. When you have 13+ distribution centers delivering goods weekly to over 12,000 stores the gas money starts to add up!
https://www.thestreet.com/story/13586330/1/dollar-general-beats-eps-estimates-in-first-quarter.html

[bump]

@Accidental_Martyr

There used to be one in the local mall called (I think) Everything’s A Dollar, but the only ones around here now are Dollar Tree.
They have an equivalent in Japan called “100 yen stores”. I checked one out when I visited Japan in the late 90’s.
100-yen shop - Wikipedia

We still have “99 Cents Only” stores, and we have one of those 100 yen stores - it’s “Daiso”, and it’s kind of a trip- all sorts of odd Japanese stuff is available.

Also… I never got the impression Dollar General, or for that matter, Family Dollar were “dollar stores”, just stores that sold cheap stuff and have the word “dollar” in their names to fool people into thinking they’re dollar stores, I suppose.

[Thudlow_Boink]

@bump

Also… I never got the impression Dollar General, or for that matter, Family Dollar were “dollar stores”, just stores that sold cheap stuff and have the word “dollar” in their names to fool people into thinking they’re dollar stores, I suppose.

According to Wikipedia, “The first Dollar General store opened in Springfield, Kentucky, on June 1, 1955, the concept was that no item in the store would cost more than one dollar.”

So, originally a store where everything cost $1 or less, which didn’t mean the same thing in 1955 that it does today.

[Skammer]

@Thudlow_Boink

According to Wikipedia, “The first Dollar General store opened in Springfield, Kentucky, on June 1, 1955, the concept was that no item in the store would cost more than one dollar.”

So, originally a store where everything cost $1 or less, which didn’t mean the same thing in 1955 that it does today.

Even today, something like 80% of their SKUs are under $10. Not bad for 75 years of inflation.

[Martini_Enfield]

@bump

We still have “99 Cents Only” stores, and we have one of those 100 yen stores - it’s “Daiso”, and it’s kind of a trip- all sorts of odd Japanese stuff is available.

We have Daiso in Australia and their thing is that A) Everything is AUD$2.80 and B) It’s full of an incredible variety of Cool Japanese Stuff You Had No Idea You Needed.

We also have a very successful chain known as The Reject Shop which sells a lot of overseas overstocked items and general discount store merchandise - it’s the sort of place where you’ll find Vietnamese Coca-Cola with Indonesian Nescafe Coffee and Palmolive dishwashing liquid from Thailand alongside generic Australian-sourced products as well.