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GOODLETTSVILLE, Tenn. — For all the financial gains that Dollar General Corp. has made under Rick Dreiling, the chairman and chief executive officer may be most proud of a less tangible achievement.
For all the financial gains that Dollar General Corp. has made under Rick Dreiling, the chairman and chief executive officer may be most proud of a less tangible achievement.
The chain’s preservation of the core culture laid out by the founding Turner family — even though it has been transformed into a company with 11,500-plus stores in 40 states approaching $20 billion in sales — is perhaps its most noteworthy accomplishment, says Dreiling. He says the essence of that culture is a willingness to go into low-income communities that other operators avoid — and stay there. It means "relentlessly focusing on meeting the basic needs of those communities day in and day out through an EDLP [everyday-low price] shelf program."
For retaining that culture while making Dollar General one of the fastest-growing companies in mass retailing over the past six years, Dreiling has been named MMR’s Retailer of the Year for 2014.
The chain’s concrete achievements under Dreiling, who plans to retire this year (he will stay on until May 2016 if the company’s bid for Family Dollar Stores Inc. is successful), include a sales increase of more than 80%, store count growth of 38% and a boost of the internal promotional rate from 23% to nearly 70%.
The expansion has had ramifications well beyond Dollar General as it has brought a spotlight and new respect to the dollar store channel generally. Dreiling says the country has room for nearly 14,000 more small-box value units, noting that even though the economy is improving, the recovery has been sharply bifurcated with less-well-off consumers still under a lot of financial pressure. Because of that, "I’m really bullish on the dollar store channel," he comments.
Another source of his optimism is that dollar channel stores such as Dollar General post $1.5 million in sales per store per year versus a big box’s $1.5 million or more in a week. Being significantly smaller than mass merchandisers and serving a more concentrated trade areas, they have much more potential for proliferation without oversaturation.
Also, he credits small-box value retailers across the board with improving their layouts and making their stores more shopable. "We’ve worked incredibly hard on affordability and presenting a reliable mix of national and private brands," he comments.
Dollar General in particular is much more viable than it was when he arrived. "The stores are better organized, more consistent and cleaner," he says. "It’s a much different shopping experience. More people are willing to come in and see what we’ve got and try our wares." The "treasure hunt" element of shopping at Dollar General has even attracted people with much higher incomes than the chain’s core consumers.
The most successful merchandising change at Dollar General has been implementing a consistent national brand offering in terms of assortment and quality of product. That, coupled with a strong private label program, has made the stores significantly more attractive, Dreiling says.
Within the mix, the chain is continuing to emphasize nonconsumables. "We’re committed to being that general store that your and my grandparents and their parents shopped in," he remarks. "We think the nonconsumable side of the business is incredibly important to that concept." The retailer is enjoying success with women’s apparel and doing a much better job with home décor, housewares and basic hardware.
Another strong segment is tobacco, which, a year after its rollout, is generating impressive same-store sales growth. Two other relatively new additions, beer and wine, are "comping incredibly well," says Dreiling. "We’re more relevant today with more broad-based products that the consumer is looking for," he says.
Consumables are a solid category for the retailer, with refrigerated and frozen food — including healthier options — doing especially well. "We are concentrating as much as ever on that side of the business even though we’re working really hard on the nonconsumables," Dreiling observes.
Overall, Dollar General is intensely focused on the basic items its core consumer is seeking. To that end it has expanded its selection of health and beauty products, particularly high-demand oral care offerings. "We’re working the H&BA side of the store just as hard as the consumption side," says Dreiling.
Storewide, private label products continue to gain prominence. Private label penetration has increased from around 16% when Dreiling joined the company to approximately 24%. "We keep doing a better job of sourcing product, manufacturing product and controlling quality," he says. In the works now is a store brand repackaging to make the chain’s private brands such as Clover Valley snappier and more consumer friendly.
Across the Dollar General mix, $1 price points remain potent draws. "We’re committed to the notion of affordability, and we are driving it by increasing the number of $1 products as well as those $5 and below," Dreiling comments. "Our $1 SKU comps are doing exceptionally well."
The upshot is that unit volume in the paper, chemical, food and pet food segments is rising significantly faster than dollar volume. "We believe that puts us in a position to be more competitive with single price point merchants — whom we share more customers with than any other retail segment out there," notes Dreiling.
The unit sales growth reflects a retailing philosophy developed over Dreiling’s decades in the industry, with food and drug chains as well as with Dollar General. "What I learned most is that it’s all about unit and transaction growth. That doesn’t necessarily mean adding more stores, but it does mean selling more stuff than the guy across the street."
When Dreiling announced last summer that he would retire effective May 30, or upon the appointment of a successor, Mike Calbert, Dollar General’s lead director, called him "one of retail’s leading CEOs." Thanking Dreiling for "outstanding leadership," Calbert credited him with driving significant shareholder value and orchestrating the chain’s improvement in "essentially every key operating metric."
Moreover, Dreiling "recruited and developed an outstanding management team and strengthened the company’s culture and mission," added Calbert.
"The board is confident the company is well positioned as we search for a new CEO," he said. "We’re fortunate to have Rick in his role until the new CEO assumes these duties."
"Dollar General is a great company because of our people and our mission of serving others," Dreiling said at the time.
