Dollar General's Quest for Expansion Moves Inside the Store

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Dollar General's Quest for Expansion Moves Inside the Store

06/28/2017

GOODLETTSVILLE, Tenn. — In the midst of the most aggressive hiring effort in the company's 78-year history, Dollar General Corp. is looking to fill 10,000 new positions in 2017. The hiring spree comes as Dollar General plans to add new complexities to its store operations as it looks to become a bigger player in fresh categories and traditional drugstore categories, Convenience Store News sister publication Retail Leader reported in a recent cover story.

Based on lessons learned from its conversion of recently acquired Walmart Express locations to the Dollar General Plus format — which includes fresh meat and produce — about 300 traditional Dollar General stores are now being remodeled to include 34 cooler doors, an increase of about 160 percent from the existing cooler footprint in these locations.

"This allows for a much greater perishable assortment, which helps drive trips and basket size. Additionally, across about one-third of these locations, we're testing an assortment of fresh produce," Dollar General CEO Todd Vasos told Retail Leader

In the company's oldest stores, it is also adding more refrigerated space, which requires adherence to cold-chain compliance procedures that are different than replenishing dry grocery or household chemicals.

"We have a focus on stores that have fewer than 10 cooler doors, which in relative terms are expected to drive the highest returns," Vasos stated. "By the end of 2017, we anticipate that across our store base, we will have an average of 17 cooler doors, up from 10 in 2012."

Another key merchandising initiative for Goodlettsville-based Dollar General is expanding in the health and beauty area.

"Health and beauty represents a large and growing department at Dollar General. These products remain a significant opportunity for us to increase our share of wallet with our customers as we have only about half of the share with our customers in these areas as compared to other consumables like paper and cleaning," the chief executive explained.

STORE COUNT EXPANSION

Merchandising isn't the only expansion Dollar General has in store for 2017.

This year alone, the company plans to open 1,000 new stores, on top of the 900 stores it opened in 2016.

To do so, the retailer is looking at acquisitions in its quest for expansion. Last year, Dollar General bought 42 former Walmart Express small-format stores. More recently, the Federal Trade Commission approved Sycamore Partners' application to sell to Dollar General 323 former Family Dollar stores that Sycamore acquired from Dollar Tree two years ago as a condition of Dollar Tree's acquisition of Family Dollar.

Between store openings and acquisitions, Dollar General's store count is expected to swell to nearly 1,300 units this year.

It costs Dollar General roughly $250,000 to open a store. This year, about 45 percent of its capital spending — expected to range from $650 million to $700 million — will go toward new stores, relocations and remodels. The company's average store does about $1.6 million in annual volume and generates sales per square foot of about $226.

"We continue to be pleased with the return on investment and performance of our real estate program, as our new stores overall are yielding returns of approximately 20 percent," according to Vasos.

Historically, Dollar General has targeted smaller, more rural communities, which is why 70 percent of the company's stores are located in towns with fewer than 20,000 people. However, while expansion opportunities continue to exist in those areas, Dollar General is more aggressively probing urban areas with a smaller-format store.

As CSNews Online previously reported, the retailer cut the ribbon on its new convenience store format, DGX in downtown Nashville, Tenn., on Jan. 20. The DGX format, which is approximately 3,400 square feet, provides urban shoppers with a focused selection of consumable items and instant consumption options in a compact format.

"We are excited about our new smaller store concept and the opportunity to serve busy city dwellers with everyday low prices on the essentials they need in a convenient, easy-to-shop format," Vasos said at the time of the store's opening. "The DGX format is geared to meet the needs of the millennial shopper, which is an emerging and important part of our customer base and will help us broaden our appeal to attract a new segment of urban customers who put a high premium on value and convenience."

Click here to read the full cover story from Convenience Store News sister publication Retail Leader