Dollar General is known for dominating the discount retail world, having experienced consecutive growth for the past 29 years with stores that entice customers into finding a bargain.
But how has Dollar General been able to breeze through challenges other retail competitors struggle to navigate? Here is what I’ve found out about Dollar General’s primary competitive advantages!
9 Dollar General Competitive Advantages
1. Staying True to Its Roots
Since its first store opened in Kentucky in 1955, Dollar General has maintained a strong focus on the purpose of its stores.
This purpose has been to provide an easy and simple shopping experience to its customers with bargain prices to supply the best for less, captured succinctly in its slogan “Save time. Save money. Every day”.
An easy shopping experience leads to customers visiting its stores more frequently, and a greater number of customers going through the checkout and spending more money every day.
2. Convenient Locations
Dollar General stores are built with the premise of filling spaces left uninhabited by other retail competitors.
With this ethos, it is estimated that 75% of Americans live within just 5 minutes of a Dollar General, giving the retailer a competitive edge in providing convenient locations for shoppers.
Many Dollar General stores are located in rural areas that cost less to operate, leading to lower costs for the company which boosts profits.
Additionally, Dollar General does not directly own its stores so if the locations are not prosperous, the company can relocate with ease.
3. Understanding Its Target Customers
Dollar General usually caters to low-income customers, tailoring the shopping experience to the needs of its primary demographic.
The target customer for Dollar General is usually from a household with a gross income of less than $40,000 a year.
Often, these shoppers live in rural areas commonly referred to as ‘food deserts’ which means that they are far away from other larger grocery stores.
In this way, Dollar General has built a loyal customer base that can find essential items required on a weekly basis at its stores (which are located nearby) at incredibly low prices.
4. A Simple Shopping Experience
With stores deliberately designed to be easy to navigate for customers, the average shopping trip at Dollar General takes just 10 minutes to complete.
Because of this, customers find it comfortable to make repeated visits to Dollar General and end up buying items because of the excellent deals.
One of the ways in which Dollar General has accomplished this is the introduction of a scan-and-go payment app called DG GO! that is available in over 250 stores to help speed up the checkout.
The Dollar General DG GO! system has useful features such as a running total to let shoppers know just how much they have spent, adding to their convenience.
5. Fast-Selling Variety Of Products
Dollar General primarily stocks products that are proven favorites such as snacks, toiletries, and other essentials, but it is also constantly expanding to more exotic items to attract new shoppers to its stores.
This means that it has a high product turnover, i.e. its shelves get empty pretty quickly on a regular basis, improving its overall revenue and profits.
Additionally, Dollar General keeps a limited amount of fresh food or perishables available for purchase in its stores which reduces the amount of waste and keeps costs low.
However, Dollar General has plans to expand this as it can help steal more customers away from competitors for their essential shopping trip.
6. Competitive Pricing
As the name suggests, Dollar General promotes its stores by offering customers competitive prices on quality items.
Many of the products on sale at Dollar General retail for around 20-40% less than the average cost in competitor grocery or drug stores.
This competitive pricing has led to a culture of customers ‘hunting’ for a bargain at Dollar General, experiencing a high level of satisfaction when they find a good deal.
At the same time, Dollar General has also begun introducing higher-quality items such as kitchenware to attract wealthier shoppers while simultaneously encouraging regular shoppers to splurge.
7. A Strategy For Consistent Growth
Currently, Dollar General operates around 16,000 stores in over 40 states in America, with 45% of those in Southern states to service its target customers.
This push to constantly expand and increase the number of stores has allowed Dollar General to capture a large proportion of the market when it comes to its target demographic.
Since its stores are relatively small (about 1/10th the size of a Walmart store), Dollar General only has to pay $250,000 to open a new store which is much lower compared to the same cost for its competitors.
This way, it is able to expand and establish new stores at a much greater rate than its competitors and ends up attracting more customers.
8. Low Operating Costs
Another way in which Dollar General maintains its competitive advantage is by constantly improving the efficiency of its operations and keeping operating costs at a minimum which increases its profits.
It accomplishes this in several ways such as by cutting costs and reducing wastages within its supply chain and preventing shoplifting.
For example, Dollar General expanded its private fleet of transport vehicles from 80 to 200 units in 2018, improving delivery times and thus saving on costs.
Additionally, Dollar General has introduced over 40 private label products for which it has a large degree of control over the production and so can optimize the processes and bring down operational costs.
9. Bulk Buying Benefits
Dollar General stocks have proven and popular brands that lead to consistent sales, and so it is able to buy huge quantities of the same products, benefitting from bulk-buying discounts.
To put this into perspective, while competitors such as Walmart stock over 60,000 unique items, Dollar General only opts for a more manageable 10,000-12,000.
Other than this, buying in bulk also helps Dollar General to be more assertive with suppliers and get a better price as compared to its competitors.
By focusing on and appealing to its target demographic, Dollar General is able to offer a competitive and straightforward shopping experience. Along with this, it also benefits from low operational costs and a sustainable strategy for rapid growth due to the small size of its stores.
When combined, these competitive advantages ultimately allow it to maintain a loyal customer base and continue to gain more success.