With only 30% of its sales coming from dollar items, Dollar General is competing on a larger scale with more known product brands. Educating the consumer in order to change their perception of dollar stores will increase sales and generate larger average dollars spent by a customer. Increasing advertising about Dollar General’s brand-named products will help educate consumers and change their perceptions. Datamonitor reported consumer’s worry that Wal-Mart threatens local businesses by under cutting prices and making them unable to compete. Dollar General can capitalize on this thought and put consumer’s worries at ease by partnering with local farmers and distributing local produce. This will increase customer loyalty while eliminating that negative perception (datamonitor). Situation Analysis
Dollar General Situation Analysis
Median Household Income – Less than $75,000
Trade Area Population – At least 4,500
Dollar General targets customers in the low, medium, and fixed income segments. Dollar Generals’ core base of customers has an annual income of $30,000 or less. The company prefers to operate its stores in small towns rather than large cities in an attempt to draw customers in from the surrounding area based on the convenience and location of its stores. Households in rural areas account for 27% of dollar store sales (Hale, 2002). Examples of other key demographics for Dollar General are lower educated females, African-American households, large and blue-collar households, and low-income (Chart 3). The dollar store is over-developed in rural areas; however, recently dollar stores have experienced a significant increase in household penetration across all income groups with higher income shoppers being the fastest growing consumer segment (Berry, 2007).
Appealing to the moderate and upper-income shoppers is the treasure hunt atmosphere of the stores. Dollar stores have been able to “expand their customer base to the higher-income consumers who enjoy the convenience of their locations and the thrill of the hunt” (O’Donnell, 2007). Another key demographic are consumers in the 55 or older age group who account for a third of dollar store sales (DSN Retailing Today, 2004). These charts and figures may not accurately portray the Hispanic market due to the fact that the surveys are written in English. MONTHLY SHOPPERS OF
THE VALUE RETAILING SEGMENT:
Retail Forward's ShopperScape survey of 4,000 households divided respondents into groups that said they shopped monthly at either dollar stores, one-price stores or closeout stores. Dollar stores included Family Dollar, Dollar General and Fred's; one-price stores included 99 Cents Only and Dollar Tree; and closeout stores included Big Lots and Tuesday Morning.
Dollar StoresOne-Price StoresCloseout Stores
Pop > 2 million28%45%42%
MSA * Pop of
500,000 – 2 million252327
Non-MSA*/small mkts under 500,000 pop473232
* Metropolitan Statistic Area
Product categories offered by Dollar General include: apparel, laundry care, home cleaning, paper products, healthcare, beauty care, food, candy, snacks, pet care, trash bags & storage, baby care, hardware & automotive, house wares & home décor, toys & games, electronics, DVDs, CDs, & books and seasonal. Brands carried include: Clorox,
Increase average customer spending and increase number of times a...