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The Industry: Discount Variety Stores

The Industry: Discount Variety Stores. Target- Add value through low prices but good quality. F ocus on the "shopping experience Costco- Membership only, wholesale , cross docking distribution, warehouse

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The Industry: Discount Variety Stores

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  1. The Industry:Discount Variety Stores • Target- Add value through low prices but good quality. Focus on the "shopping experience • Costco- Membership only, wholesale , cross docking distribution, warehouse • Wal-Mart- Wide variety of items,, “rollback,” unique payment agreement with suppliers, warehouse • Dollar General- “in and out,” founder of dollar store concept, consistently low prices in a convenient, small-store format. Prices are low due to low cost operating structure and relatively limited assortment of products

  2. Discount Variety Stores Industry • Discount consumer goods market is highly competitive industry with respect to • price • store location • merchandise quality • assortment and presentation • in-stock consistency • customer service

  3. “Save Time. Save Money.” • Largest discount retailer in the US by number of stores • Goodlettsville, Tennessee • 11,000 stores • 40 States • Southern, Southwestern, Midwestern, Eastern US • Merchandise is typically $10 or less • Founded in 1939 • Stock publicly traded in 2009

  4. Product Types • Two brands: 1)High quality nationalbrands from leading manufacturers 2)Comparable quality privatebrand selections 10,000 SKUS/store 10$ or less

  5. How are they profitable? • Convenient Locations • Time Saving Shopping Experience • Everyday Low Prices on Quality Merchandise • Key items in a broad range of general merchandise categories • Most basic shopping needs are met in one trip

  6. Store Plan • 7300 square feet • Operated by a store manager, assistant store manager, three or more sales clerks • 63% stores n freestanding buildings • 37% in strip shopping centers • Low cost, no frills building with limited maintenance capital, low operating costs, and focused merchandise offering with a brad range of categories

  7. Business Model:Value and Convenience • Convenient locations “small box” • Easy “in and out” shopping format • Less cyclical model • Compelling value and convenience proposition • 23rd consecutive year of same store sales growth • Highest sales in 4Q • Loyalty factor • Profitably exists in all types of markets: • Markets with limited shopping alternatives • Profitably coexists alongside larger retailers in more competitive markets

  8. Net Sales

  9. Growth Strategy • Growing Store Base: Expansion in core markets and into new states • Opportunities: Improvements in:-stock positions, • Increasing same store sales • Expanding operating profit rate • Remodeling and relocation • Remodeled 592, 575, 504 (’12,11’,’10) • Plus conversion 82 (’12)

  10. Success • 23rd consecutive year of same store sales growth • Average net sales per square foot increased from $210-$213-$216 (‘10-‘11-’12) • Strong cash flows and investment returns while simultaneously low retail prices

  11. Customers • Reliance differs based on financial situation and geographic proximity • Fill-in-shopping, periodic trips to stock up on household items, weekly trips to meet essential needs • Attract customers by focusing on product quality and selection, in-stock levels and pricing, targeted advertising, improved store standards, convenient site locations, and a pleasant overall experience • Low to lower-middle-income target

  12. Suppliers • DG purchases merchandise from a wide variety of suppliers and maintains direct buying relationships with many producers of national brand merchandise • -P&G, PepsiCo, Coca-Cola, General Mills, Nestle, Unilever, Kimberly Clark, Kellogg’s, Nabisco • Maintain a limited number of SKUs per category (pricing advantage) • Private brands come from a diversified supplier base

  13. More about Suppliers • National brands: 8% and 7% of DG purchases in 2012 were from DG’s largest and second largest suppliers, respectively. • Private brands: Diversified supplier base. Directly imported approximately $765 million or 7% of our purchases at cost (11% of our purchases based on their retail value) in 2012 • Suppliers easily replaceable- “we would generally be able to obtain alternative sources without experiencing a substantial disruption of our business”

  14. Distribution • Stores currently supported by 11 distribution centers

  15. Employees • As of March 1, 2013 employed 90,500 full time and part-time employees

  16. Competition • Family Dollar, Dollar Tree, 99 Cents Only • Wal-Mart, Target, Walgreens, CVS, Rite Aid

  17. SWOT

  18. Risk • Economic Conditions • Intense Competition • Private Brands and Broad Market Acceptance • Disruption to distribution network or inventory • Rising fuel costs • Domestic and Foreign suppliers • Product liability and food safety claims • Lack of timely renovation/remodeling

  19. Porter’s Value-Chain Model Low Cost is Key

  20. Porter’s Five Forces Model

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