How Dollar General plans to reinvent the dollar store experience

Date : 24 March 2021

Maxime Delacour

Senior Retail Analyst

Dollar General posted an impressive net sales increase of 21.6% to $33.7bn in 2020 driven by its numerous real estate projects and its value and convenience proposition. In 2021, the retailer will focus on the evolution of its existing store models and launch new concepts to continue to reach more shoppers and meet their evolving needs. 

Q4 results and full year performance

Fourth quarter net sales increased by 17.6% to $8.4 bn supported by a significant growth of the average basket size offsetting a decline in customer traffic. Commenting on the results and performance CEO Tod Vasos said “Collectively, our fourth quarter and full year results reflect strong and disciplined execution across many fronts and further validate our belief that we are pursuing the right strategies to enable sustainable growth.”

Key achievement and results for Dollar General FY 2020:

  • Total net sales increased by 21.6% to $33.7 bn
  • Comparable sales increased by 16.3%
  • Total COVID-19 related investment of $248 m 
  • 17,000 stores milestone reached. 75% of the US population live less than 5 miles to a Dollar General store
  • 2,780 real estate projects completed (target of 2,580) including more than 1,000 new openings
  • Launch of new concept pOpshelf targeting more affluent shoppers

Looking ahead to 2021, Dollar General expects its net sales to be in the range of -2% or flat due to the uniqueness of 2020 and a trading environment still uncertain. Yet, the discounter expects a stronger second half of the year.

Source: Dollar General 

Drive profitable growth through improved operations and new store concepts

Dollar General detailed its road map for 2021 to drive profitable growth further. The focus will be on improving existing stores and their assortment whilst accelerating the roll-out of the newest store concepts. Here are the main operating priorities for the year to come:

Maintain strong opening plans: the fast expansion pace will continue with 2,900 real estate projects planned. It includes the opening of 1,050 new stores and the remodel of 1,750 existing ones. In the longer-term COO Jeff Owen estimates there is space for 13,000 additional stores in the US.

More agile and flexible store format: building on the success of the larger store format, Dollar General Plus (DGP), two additional formats have been introduced. A new 850 sq m format (vs 730 sq m on average) will accommodate the larger assortment including more chillers, freezers and space for non-grocery categories. Dollar General also plans to open 100 stores with a footprint of 950 sq m. These even larger stores will have more space for fresh food categories, additional checkouts and self-checkouts, enabling the discounter to better meet its customers’ needs.

Accelerate the number of openings for Popshelf: the new concept launched in October 2020 has exceeded all expectations. It offers a fun affordable and differentiated treasure hunt targeting a mix of younger and more affluent shoppers. The plan is now to open around 50 stores this year instead of 30 and test a shop-in-shop concept within 25 Dollar General stores. Jeff Owen, estimates there could be space for up to 3,000 Popshelf stores in the US in the longer term.

Expansion of non-grocery categories: the non-consumable initiative consisting in offering a larger assortment of non-grocery items will be rolled out to another 5,700 stores bringing the total to 11,000.

Continue the roll out of DG Fresh: the strategic multiphase project to shift to self-distribution of frozen and chilled products aims at creating a more efficient supply and reduce costs. DG Fresh also aims at increasing sales across these two categories. Dollar General will continue to add new products to these categories and expects to complete the roll out of DG Fresh to all stores by the end of 2021.

Offer produce at more stores: in 2021, 700 additional stores are expected to offer fresh produce bringing the total to 1,800. Once the roll out of DG Fresh for chilled and frozen categories is completed a second phase could see it focus switch to the produce category. Dollar General is confident there is a potential for up to 10,000 stores to offer produce through the DG Fresh project.

Accelerate the digital transformation to complement the physical stores

The digital strategy aims at building an ecosystem that will provide a more convenient, frictionless and personalised experience. In 2020, the focus was on the roll out of the click and collect service DG Pickup, now available at all stores. The mobile app offering digital coupons, a cart calculator and the DG GO! mobile checkout now has 4 million active users.

Source: Dollar General 

In 2021, the focus will be on developing more personalised offers and drive customer’s engagement and loyalty further via the improvement of the different digital solutions and services.

Leverage and reinforce its low-cost position

Dollar General’ strategy is to reinforce its cost control mindset while keeping the customer at the centre. Its Fast Track initiatives aim at improving labour productivity in-stores by using more efficient solutions to display products such as, rolltainers and shelf ready packaging.

The initiatives also include the roll out of self-checkout. Around 1,600 stores are currently equipped with this solution with the objective to implement it at all stores by the end of 2022.

Our view on Dollar General’s priorities

These three strategic priorities are aligned with the global trends we identified for the channel for 2021. Retail Analysis subscribers can access our report on the five trends shaping the discount channel in 2021 here.

The many developments around the store formats and new concepts prove the physical store will remain at the heart of the discounter’s strategies. The evolution of the Dollar General stores, including the larger assortment, the integration of grocery ecommerce and the wider use of digital solutions will enable the discounter to meet more of its customers’ needs and remain relevant.

Across the US and Europe, Dollar General is among the most advanced discounter in terms of grocery ecommerce development. It’s the very first one to offer click and collect at such a large scale. The planned evolution of its app towards more personalised offers resonates with what Lidl is currently doing with its Lidl Plus app. These development show how the major discounters are increasingly catching up with other major retailers and could continue to disrupt the grocery retail industry further.

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