Perdue's decision to take a Fortune 500 value store and add fresh foods to boost foot traffic significantly appears to be working.
A May 2005 company report, showing total year-to-date sales up 12.8% and same-store sales up 4.3%, said the increase was "driven by strong sales increases in food, including perishables, candy and snacks."
The Dollar General Market format, launched shortly after Perdue took over two years ago, is roughly twice the size of a conventional Dollar General store, which averages a little more than 7,000 square feet. In the new format, half the store is devoted to food and the other half to general merchandise.
"This model is quickly transforming Dollar General into a destination as opposed to a fill-in," Perdue said at a retail summit meeting in Miami earlier this year.
From all appearances, the Dollar General Market format is doing well, and it could be the company's next growth vehicle, industry sources told SN.
In fact, they said a rapid rollout of the Market format, which includes an increasingly large product mix of fresh produce and refrigerated dairy and deli products, could pose a threat to supermarkets.
"The major development this year at Dollar General has been the continued evolution of the Market format," said Neil Stern, senior partner, McMillan/Doolittle, Chicago. "They've also continued to evolve their store mix to try to drive more traffic. These are both potential threats to the grocery business."
Plans for this year include opening 30 more Dollar General Markets by the end of the company's fiscal year, which runs through January, said Karen Moss, director of corporate communications at the Goodlettsville, Tenn.-based retailer.
In 2004, the company added refrigerated coolers to many of its stores, not including the Dollar General Markets. Those coolers hold frequently purchased items such as milk, eggs and lunch meats.
The strategy is to increase the frequency of customers' visits and lure new customers with the convenience of being able to buy fresh foods in a small, easily navigated format.
"By offering a faster and easier shopping solution for busy customers, we are redefining convenience," Perdue told his audience in Miami. Dollar General stores appeal to people trying to avoid crowded parking lots and supercenters, he said.
Dollar General Markets' compact size, at about 14,000 square feet, enables the company to take advantage of small, bargain-priced real-estate parcels, some of them in the shadow of Wal-Mart Stores and other supercenters.
Dollar General, with more than 7,400 units, evolved from Turner's Department Store in Springfield, Ky. The last Turner's was converted to a Dollar General store, with no item retailing for more than $1, in 1955. Perdue was appointed chairman and chief executive officer in 2003, shortly after Cal Turner Jr. stepped down from those posts.