Memo of Dollar General

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Relevant Economic Trends With the exception of supercenters such as Costco and BJ’s, the fastest-growing portion of the overall retail industry in the United States during the past decade has been in the dollar store segment. From 2000-2005 dollar stores had a compound annual growth rate (CAGR) of 10.2% which was nearly double the 5.6% CAGR in the retail industry as a whole. Sales from these discount stores were $24.7 billion in 2000 and were expected to more than double to $51.1 billion in 2009 (Exhibit 8). Two main drivers fueled this growth trend. The first was a cultural shift in consumers towards a bargain-based mentality. This was spurred by an increased presence of retailers with a low cost strategy including Wal-Mart,…show more content…
They emphasize the use of even-dollar prices on most items to conveniently make it easy for customers to track how much they are spending before they get to the checkout line. This coupled with their focused assortment of quality goods allows easy in and out shopping and saves the customer time. DG competes against big-box retailers such as Wal-Mart through price and convenience rather than price and selection. The average DG store is 6,900 square feet with about 4,900 stock-keeping units (SKUs) serving customers who live within five miles of the store. The average Wal-Mart on the other hand is over 100,000 square feet containing more than 75,000 SKUs and serves many customers living more than five miles away. Strategically limiting the number of brands and sizes as well as purchasing fast-turning SKUs gives DG the leverage to negotiate low purchase prices when bargaining with suppliers based on the higher volume of individual SKUs being purchased. This allows them to offer competitive prices while achieving price parity with big-box retailers selling the same items and on occasion even beating these competitor’s prices. Focusing on both price and convenience also allows DG to compete and differentiate themselves from other small convenience, discount, and drugstore retailers who typically focus on either price or convenience but

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