WHITE SULPHUR SPRINGS, W.Va. - Dollar General is hoping to abandon its dollar-store label to build a more sophisticated food and general merchandise business for an increasingly diverse customer base, said David Perdue, chairman and chief executive officer of the $8.6 billion company that operates some 8,000 U.S. stores.
"We want to differentiate from the dollar-only format," Perdue told the Grocery Manufacturers Association's Executive Conference here last week. "That image hurts us because it involves a closeout house."
Instead, Perdue puts his operation into the larger class of "small-box, extreme-value discounting," and plans to enhance assortments and embrace tools such as category management to more rigorously evaluate performance of food and nonfood items.
This retail segment, whether called dollar store or extreme-value, has been one of the few to give Wal-Mart Stores sharp price competition and is increasingly adding food to its assortments. It was built on a base of lower-income customers who are now hurting from high gas prices. However, Dollar General is attempting to broaden its marketing to shoppers beyond this core group.
"We serve the low-income consumer, but 25% of our shoppers have incomes over $75,000," he said. "We don't know why. We don't market to them, yet it's the fastest-growing segment. The soccer mom is now finding Dollar General."
The retailer also needs to sharpen its appeal to Hispanic shoppers, Perdue said.
"We're under-penetrated in that demographic. They are about 11%-12% of the population but less than 7% of our shoppers. We need to do something different in our format. We can't just have three endcaps for our Hispanic mix. We want to appeal across all categories."
Perdue said the company is becoming more scientific about its assortments and is reaching out to suppliers for help as it plans more than 800 new stores this year.
"Help us decide on the most productive SKUs," Perdue urged the supplier-heavy audience at the GMA event. "You want shelf space. But every SKU must be productive.
"I need national brands to draw traffic for higher-end and Hispanic categories."
The retailer is embracing category management as a primary tool in the merchandising effort. "Before, we did this informally," he said. "We're changing that. We're championing the planogram process and evaluating allocation of floor space and shelf space to categories. You'll see a lot of changes."
This more rigorous approach comes as the retailer opens its 50th Dollar General Market, a new format that includes categories such as fresh produce and meat, which aren't carried in the other Dollar General stores.
"It's still in the test phase, but we are definitely excited about what we're finding," he said of Dollar General Market. "We can service 100% of the grocery needs of the consumer in this concept. This format is strong on national brands, as are our traditional stores."
Dollar General is also pursuing branding opportunities, including last year's tie-in with NASCAR, which is growing in the second year of the collaboration.
