Dollar General Takes a Place in Tobacco Sales Arena

GOODLETTSVILLE, Tenn. — Dollar General is planning to add cigarettes and other tobacco products to the product mix at the majority of its U.S. stores by the middle of 2013. The locally based company, with 10,000 retail locations nationwide, cited "competitive pressures" and a perceived customer demand as the reasons behind this move.

The rollout follows on the heels of competitor Family Dollar Stores' decision to add cigarettes to its stores last year, according to The Tennessean.

"As the competitive environment changes, offering tobacco and cigarette products in our stores will drive additional traffic," Dollar General said in a statement. The company reported that it will take until the middle of 2013 before the tobacco products will be available in all stores.

Dollar General also noted that its core customers are more likely to smoke than the national average. The move will help the company generate more sales and profits, analyst Mark Montagna with Avondale Partners in Nashville, told the news outlet. "I think it's a smart idea; it's what the customer wants," he said.

Dollar General began testing tobacco products in Nevada last year and added them earlier this year in Florida to see how they would impact sales, Montagna said. The company found that the average purchase per customer was $14 in stores where tobacco was sold vs. an average of $11 otherwise.

Despite the basket lift for Dollar General, its decision is not without critics.

"Smoking in the United States is declining, and stores that choose not to sell tobacco will benefit by publicizing that," said Patrick Reynolds, founder of the California-based Foundation for a Smoke-Free America. "People like to shop where they feel the management has integrity, and not where they feel management just wants to make a profit without regard to the health of their customers."

Montagna, though, doesn't believe that Dollar General's reputation will be hurt by the addition of tobacco products. "Customers will still want to go there because of the low prices and convenience," he said. "Dollar General has price parity with Walmart, but customers are in and out so quickly."

He did point out one challenge the company will face with tobacco products: shoplifting, according to the newspaper. "Adding tobacco is really wise if they do it correctly, but they have to have a large focus on how to prevent shrinkage (theft)," he said. "It's definitely the No. 1 shrink category."

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