Because Dollar General does not sell in bulk, they tailor their supply chain to focus on more frequent deliveries of goods to smaller stores. Although this creates some inefficiencies relative to their big box rivals who were able to ship larger truckloads to their stores, Dollar General benefits from a denser network of stores in many areas as they had more than twice as many US locations (11,061) as Wal-Mart (4,807) in 2013. Additionally, Dollar General owns all trailers moving to and from distribution centers, but subcontracts trucking [dollar general 10K]. This reduces their necessary capital investment, while retaining key distribution activities including control of the loading, unloading and delivery scheduling of products to both retail stores and distribution centers.
Pairing Cost Leadership & Convenience (Strategy & Value Creation, Delivery and Capture)
Historically, Dollar General operated in a highly price sensitive market segment, with 55% of its consumer base earning an average annual gross income of less than $40,000. To attract these customers, Dollar General employed an Everyday Low Price strategy similar to Wal-Mart’s. Thus, keeping costs low and driving high traffic volumes were critical to the company’s financial success. Dollar General achieved this strategy in several ways, including keeping rents and labor costs low, locating in low-income, high traffic areas that offered consumers few substitutes, and offering a wide variety of popular CPG and white label goods.
Given the dominance and fiercely competitive nature of Wal-Mart and Target within the big box discount retail industry, Dollar General avoided competing head-to-head with these larger rivals by differentiating a classic generic business model. In essence, the company emphasized a combination of low costs, highly convenient store locations and formats, and product assortments tailored to each store’s particular location as key differentiators.
Real Estate - As Dollar General expanded to over 11,000 company-owned stores in 2013, real estate acquisition and development had become a key piece of the business model. Stores were designed with a small footprint (<10,000 square feet) and were located in low income (and low-rent)...