Dollar General

Submitted by: Group 5

Aditya Jaiswal - 2011289

Chelsea Khandelwal - 2011055
Kamlesh Nayak - 2011340
Nitin Prabhakar - 2011312
Prakhar Pandey - 2011174
Sai Gowtham - 2011211
Siddharth Nahar - 2011243
Suraj Jain - 2011254
 · Operated small format stores that offered a focused

About : Dollar General assortment of basic consumables like packaged food and
refrigerated products, cleaning supplies, housewares,
stationery, seasonal goods, basic clothing and domestics.
· They served primarily low, middle and fixed income
families in 35 states (less presence in western US)
· Average store had 6900 sq ft of selling space and the
catchment area was within 5 miles
· Switched from wholesale to retail
· The company had evolved over the past decade to
become a retailer that provided highly consumable
products from being a five and dime retailer
· Most of the products sold at Dollar General were
household consumables priced under $10
· 8260 stores in early 2007
· Revenues stood at $9.2 Billion, growing at 9% CAGR in
the past 5 years
· How to drive growth?
· Through new store openings or merchandising and in-
store operational improvements?
Q1. Compare the business model
of Extreme Value Retailers in
general and Dollar General in
particular with mass discount
retailers with Walmart.
- For 5 years upto 2006, Dollar General revenue grows
at 9% per year.
- WalMart was outperformed by only 3 companies, in
sales growth and profit growth, Dollar General being
one of them
-Extreme value retailers had more focused assortment
compared to mass retailers like Walmart
- With less assortment, they still had significant
number of Nationally branded products
- Extreme-value retailers compete on convenience and
price compared mass retailers who compete on large
assortments and price
- Many products offered at extreme value retailers
were in fact $1, price could range upto $10 Or $15
Q2. Analyze the growth of Dollar
general in the recent past?
● Grown from 6273 stores in 2003 to 8260 in early
2007
● Revenues increased to $9.2 billion by the end of
2006
● 9% CAGR for last five years
● Outperformed Walmart in sales growth and profit
growth
● Many structural changes were implemented in
past five years
● Launched Project Alpha in 2006, focused on
upgrading existing store base
● Closed 128 low-potential stores and eliminated
the legacy inventory pack-away policy
● Due to these changes the finances of 2006 were
affected
● Net income came down to $138 million in 2006
from $350 million in 2005
 Walmart may be successful in
Q3 Do you think Wal- ●
replicating Dollar General’s success
mart will be able to but:
○ Their current business model will not
replicate Dollar be in sync with smaller stores model.
General’s success? ○ Reducing SKU’s at smaller stores can
have consequences of customer
dissatisfaction and merchant
dissatisfaction.
○ Reducing cost further will mean
reevaluating its supply chain. Although
walmart’s existing stores can support
the new stores.
○ The larger Walmart stores revenue
may be cannibalised due to their
smaller stores.
Improvement Opportunities

Increase presence in US Improve Merchandising Productivity

Pros Cons Pros Cons

● Large Market ● Cost ● New customers ● Doesn’t feel like

● Selecting regions ● Possible ● Compete with dollar store
that have no Rejection Walmart ● Costly
major retailer ● Advertisement ● More resources
Improvement Opportunities
Go Private New Store Format

Pros Cons Pros Cons

● Focus on long ● Could hurt in ● Closing stores ● Increased prices

term profitability short term ● More space ● Implementation
● New goals ● Decreased ● Customer cost
valuation Perception

Pros Cons
International Expansion
We suggest this. Even though there are high ● Bigger Reach ● Risky
difficulties, shareholder wealth maximization is ● New market ● Cultural
highest with this option ● Diversification Differences