New DGX branded format will be designed to meet the needs of busy, metropolitan shoppers.
Dollar General has been pursuing a path to growth that includes adding 10,000 employees and 1,000 new stores and introducing price cuts to boost customer traffic with low prices. CEO Todd Vasos made it clear that these moves are an obvious attempt to challenge competitors like Walmart and Target by targeting lower-income customers. In September, Dollar General cut prices by 10 percent on average on approximately 450 of its best-selling items across 2,200 stores.
Vasos explained, “We are taking aggressive action across merchandising and store operations to address these factors and help drive same-store sales,” he said. “And we will continue to be very disciplined in our [Selling, General and Administrative Expenses] spending… [I]t will take time to our initiatives to resonate with our consumer.”
Part of the growth strategy also includes adding physical stores and employees in order to greater meet the needs of the customers. In March, Dollar General announced plans to add approximately 1,000 new stores over the course of fiscal 2017, growth that falls in line with its model of 6-8 percent increase in square footage, according to a news release.
“Dollar General has a powerful strategic plan that enables us to drive both the top line and bottom line to deliver strong financial returns as outlined in our growth model over the long-term. With strong cash flow and an efficient capital structure, we believe that we have a compelling opportunity to invest for growth while also returning cash to shareholders through consistent share repurchases and anticipated quarterly dividends,” said Todd Vasos, Dollar General’s chief executive officer.
One other segment that Dollar General believes it can better serve with new stores is the busy, urban consumer. That is the driving force behind the chain’s latest announcement that it is launching a new smaller format store, tentatively branded DGX, to meet this need. The stores will be roughly 3,400 square feet in size, and the first one is now under construction near downtown Nashville. A second store is scheduled to open in Raleigh, North Carolina, according to a press release. The idea is to provide everyday essential at low prices in a convenient, easy-to-shop format.
Offerings at the new DGX stores will include a soda fountain, coffee station, and grab-and-go sandwiches, as well as limited grocery offerings, pet supplies, candies and snacks, paper products, home cleaning supplies, and an expanded health and beauty section. The brand will also go beyond traditional convenience store inventory by offering a carefully curated selection of home, electronics and seasonal product. Checkout lanes will be geared toward high-volume, smaller basket sales.
Kohls, Target, and Walmart have all been experimenting with various formats for their stores to meet the needs of urban populations with varying degrees of success.
