Dollar General sees the future. And it’s not self-checkout.
The retailer is so sure of this, it’s invested $150 million in labor in order to increase the number of store employees, and especially to give a boost to a new opportunity it’s testing out: the assisted checkout.
On Thursday, during a fourth quarter earnings call, Dollar General CEO Todd Vasos laid out his plans for an increased customer experience within the discount store: a big boost in customer-facing store employees, as well as an increase in inventory management and a bigger investment in district managers.
The focus on a personalized experience, Vasos said during Thursday’s call, will be key.
The company currently offers self-checkout in 14,000 stores, but that’s not where Vasos wants shoppers heading. Instead, the main goal is to get a shopper into a standard checkout, being assisted by an employee. Barring that, the retailer has now added assisted checkout in about 9,000 locations.
For the remaining stores that have self-checkout but not the assisted checkout option, shoppers are only allowed to scan five items or less in the self-checkout line.
Vasos also noted that the plan is to completely remove self-checkout in some 300 stores which produce the highest shrink during the opening months of 2024.
“Collectively, we believe these steps are in line with where the customer wants us to be,” Vasos said, “which includes increasing personal engagement with them at the store.”
The change in the approach to help shoppers with transactions is just one of many actions Dollar General is taking to improve the store experience.
Vasos said his leadership team spent the last couple of months directly engaging with associates through listening sessions in stores, distribution centers, and DG’s store support center. Dollar General also hosted more than 400 field leaders in Nashville in February, and time was spent with more than 1,000 additional leaders across the country.
Dollar General has also added specific inventory management shifts and has conducted specialized inventory training in each store, and Vasos said it has led to stock level improvement at locations.
More than 140 new districts and district managers have been added to reduce the number of stores assigned to each district manager by about 15%. The move is designed to increase both the opportunity for engagement with store managers and their teams and to drive consistency and execution across the store base.
Just be on time
One of the top priorities for DG this year is to improve rates of on-time and full truck deliveries. In 2024, the retailer will conduct its first full scale refresh of the sorting process at distribution centers since the launch of the fast-track sortation initiative in 2017.
Dollar General is further updating its sorting process to improve distribution flow while enabling store teams to unload the truck and restock shelves more quickly.
Inventory also has been reduced and the flow has been optimized in the supply chain. Dollar General closed five temporary warehouses in 2023 and is expected to shut down seven more this year. Vasos said the move helps lower costs and improves inventory flow throughout the supply chain. Dollar General hit its on-time delivery rate for the first time last week.
Dollar General has been able to lower the average inventory per store while improving in-stock rates. The number of SKUs have been reduced by up to 1,000.
Floor stands and end cap resets also have been cut back in stores, increasing the number of products that go straight to the shelves.
Tightening shrink
The reduction of SKUs should help DG with shrink inventory, and the retailer has also put shrink incentive programs in place for store managers and is starting to use high shrink planograms where certain high shrink items are removed from high shrink stores.
“While we anticipate a continuing headwind from shrink early this year, we believe our actions will have a significant mitigation impact in the back half of the year and into 2025,” Vasos said.
Dollar General wants to get back to pre-pandemic shrink levels, which were at an all-time low, as it moves through 2025 and 2026.
Steve Deckard is now in charge of store operations and ran the company’s shrink program during the years leading up to the COVID-19 pandemic.
An AI solution was brought in to monitor hundreds of thousands of self-checkout transactions to see how much true shrink occurred.
Go long
Vasos provided an update on Dollar General’s “Back to Basics” strategy and used a football analogy. He said when the initiative was started in late 2023, the company was on its own 10-yard line, and now, entering Q1, DG is just crossing its own 35-yard line.
Vasos said he feels everything is on track to move across the 50-yard line by the end of the first quarter, and by 2025 DG should be in the red zone, which is a term used to describe the final 20 yards before the goal line.
Popping up
Dollar General also plans to open 800 stores this year, including 30 Popshelf locations, the retailer’s more upscale store concept. Geared to wealthier shoppers, Popshelf stores offer items like beauty products and home décor which are not offered at typical DG stores.
Dollar General recently began shipping from a Popshelf-only distribution center in Georgia.
“We continue to believe that the Popshelf concept provides additional growth opportunity but are cognizant of the near-term pressures impacting non-consumable sales,” said Vasos.
