Dollar General Sees California as Big Opportunity

NASHVILLE, Tenn. — With more than 10,000 stores already in operation, Dollar General Corp. [4] sees opportunities for close to 11,000 more, including more than 1,000 in California, Rick Dreiling [5], chairman and chief executive officer, told investors here last week.

He said the company operates 10,100 stores in 40 states, “and in those states there are another 8,800 opportunities for a dollar store. And if you count states we’re not in, there are another 1,200 opportunities.”

Rick Dreiling [5]Dollar General anticipates tremendous growth from its entry into California, Dreiling added. “California for us will be as large as Texas someday, and we have over 1,000 stores in Texas.”

The company expects to open 50 stores in California this year, he said.

At store level, Dollar General has created a new “freshness zone” that groups produce, meat, frozen and refrigerated foods to the front corner in new and remodeled locations, Dreiling noted.

The company has also moved produce and meat to the top of its ads “to drive home the idea we are a freshness alternative,” he pointed out.

Dreiling said Dollar General will utilize the 80-20 rule on merchandising meat and produce. “We intend to carry 20% of the SKUs that drive 80% of the sales on the theory that that’s going to allow us to control the shrink and control the margin,” he explained.

Dollar General Boosts Store Size [6]

“There are items in the produce department that are wonderful half the year, but the other half they’re doing noting but creating shrink. So we’re going to carry those items when they’re fresh, they smell good and they’re attractive to the consumer and when they’re not, we won’t.

“And it’s the exact same thing in meat. When you come into our store, you’ll have that 20% of the items that drive 80% of the sales.

Dollar General ‘Pleased’ With New DG Markets [7]

“The advantage we have — and why we believe we can get away with that — is we are a limited-assortment store, and people do not expect to finish their basket when they come into our stores. We’re going to be able to create excitement in produce and meat by sticking to that.”

Dreiling said Dollar General has hired new directors to oversee produce and meat.

He also said Dollar General’s perishables business has grown — from 12.3% of all baskets in 2008 to 17.8% in the first quarter of this year.

According to Dreiling, the inclusion of consumables boosts the chain’s average basket size from $10.89 to $17.13.