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The Industry: Discount Variety Stores

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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)
success
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
customers
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
suppliers
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
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”
distribution
Distribution
  • Stores currently supported by 11 distribution centers
employees
Employees
  • As of March 1, 2013 employed 90,500 full time and part-time employees
competition
Competition
  • Family Dollar, Dollar Tree, 99 Cents Only
  • Wal-Mart, Target, Walgreens, CVS, Rite Aid
slide19
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
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