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The Industry: Discount Variety Stores - PowerPoint PPT Presentation

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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
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

Discount variety stores industry
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

Save time save money
“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

Product types
Product Types

  • Two brands:

    1)High quality nationalbrands from leading manufacturers 2)Comparable quality privatebrand selections

    10,000 SKUS/store

    10$ or less

How are they profitable
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

Store plan
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

Business model value and convenience
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

Growth strategy
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)


  • 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


  • 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


  • 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

More about suppliers
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”


  • Stores currently supported by 11 distribution centers


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


  • Family Dollar, Dollar Tree, 99 Cents Only

  • Wal-Mart, Target, Walgreens, CVS, Rite Aid


  • 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