Dollar General is one of the largest discount retailers in the United States, with over 18,000 stores across 46 states. The company specializes in affordable merchandise like food, household essentials, cleaning supplies, clothing, and more – all generally priced at $10 or less.
Dollar General’s extensive footprint did not happen by accident. The company utilizes sophisticated data analytics and logistics to identify optimal sites for new store locations. By carefully researching locations down to the neighborhood level, Dollar General can maximize its growth while tailoring each store to the surrounding community’s needs.
Real Estate Strategy
Dollar General looks for certain criteria when evaluating potential new store sites:
- Areas with 3,000-4,000 households within a 3-mile radius.
- Median household income between $40,000-$70,000.
- Adjacent to high-traffic shopping centers and intersections.
- Easy access from major roads and highways.
- Ample parking availability.
The company wants convenient sites visible and accessible to customers in middle-income suburban or rural areas. While the chain originated in rural regions, Dollar General now pursues a mixture of small town and metro area placements.
Dollar General also analyzes factors like nearby competitors, area demographics, traffic patterns, zoning, and population density. The company prefers freestanding locations with consistent vehicle and foot traffic.
Site Selection Process
Dollar General’s real estate management team spearheads the site selection process. They search for promising locations across the country based on growth potential, then narrow down the options using data and analytics.
Preliminary Research
First, the team researches regions showing positive economic factors, such as job growth, household formation, and construction activity. They analyze population shifts and avoid areas losing residents.
Next, they break down areas into neighborhoods of 3,000-4,000 households. The goal is identifying neighborhoods with the right income levels and demand for discounted goods.
The team gathers data on each area’s retail sales numbers, existing stores, competitors, traffic counts, drive time, and other metrics. This data helps them pinpoint specific sites within target neighborhoods.
Due Diligence
For potential sites that pass the initial screening, Dollar General conducts extensive due diligence:
- Demographic Analysis – Detailed examination of population, households, income levels, age, occupation, and other statistics.
- Site Visits – In-person visits to evaluate visibility, access, parking, traffic, nearby shopping centers, and competitors.
- Mapping – Mapping drive time and trade areas using geospatial analytics to determine the customer base.
This due diligence results in a comprehensive feasibility analysis weighing the site’s overall potential.
Approval Process
If the location passes the feasibility analysis, Dollar General submits a formal request to its internal real estate committee. This group evaluates the opportunity further, looking at metrics like projected sales, expenses, and return on investment.
Locations approved by the committee can then move forward with leasing, permitting, and pre-opening preparations. The typical process from site selection to store opening takes 6-8 months.
Tailoring Inventory to Neighborhoods
A key part of Dollar General’s strategy is customizing individual store inventory based on the surrounding community’s demographics. While each location carries the company’s core selection of deeply discounted goods, the exact product mix gets tailored at the neighborhood level.
Hyper-Local Offerings
Through geospatial mapping and data analytics, Dollar General can define trade areas down to the census block group. The company determines the household composition, ethnicities, languages, and other traits of communities to provide merchandise that caters to local needs.
For example, stores in Hispanic neighborhoods carry more Latin American foods and Spanish-language items. Locations near colleges stock more dorm room essentials. Stores in cooler climates dedicate more space to winter apparel than those in the South.
Local Partnerships
Dollar General buyers also visit stores to evaluate community preferences and spot new partnership opportunities. By teaming up with local vendors, farms, and suppliers, stores can tailor inventory to unique regional offerings.
For instance, select locations in apple-growing regions of upstate New York feature apples from local orchards. Stores in Wisconsin source cheese from state dairy producers. Florida stores stock tropical fruits from local groves.
This hyper-local approach helps Dollar General become a neighborhood store rather than just another big-box retailer. Customers appreciate finding familiar products sourced right in their communities.
Physical Store Format
While merchandise adapts across locations, Dollar General’s actual store format remains consistent. The company follows a prototypical building footprint between 7,300 and 9,500 square feet. This allows efficient space planning across stores.
Interior Layout
Despite slight variations in size, Dollar General locations adhere to a similar grid-like floorplan:
- Rows of shelves running from front to back
- Aisles spaced 10-12 feet apart
- Cash registers at front corner of store
- Manager’s office in back of store
- Stockrooms/storage near rear entrance
- Around 75% of floor space for shopping areas
This straightforward layout facilitates quick trips, as customers can easily grab essentials and check out. It also enables flexible merchandise planning, as shelf space gets adjusted across categories based on location.
Exterior Design
Shoppers spot Dollar General stores through signature elements like:
- Yellow signage/logo
- Dark brown entrance doors
- Yellow stripe around building’s exterior
- Rectangular white wall panels
- Multiple entrances on front facade
Visually, stores aim for an updated, energized look while retaining Dollar General’s classic image. Wider aisles, higher ceilings, and improved lighting help stores feel open and inviting.
Geographic Growth Strategy
Dollar General continues pursuing aggressive expansion, aiming to eventually operate up to 26,000 stores. But the company is also evolving its geographic strategy.
Filling In Existing Markets
Many prime suburban growth opportunities within Dollar General’s existing southern U.S. footprint have already been seized. So the company is now focused on increasing rural presence while also filling gaps in mature metro markets.
Dollar General is targeting more small towns with fewer than 3,000 residents. It also continues entering new states and metro regions like the Pacific Northwest, New England, and other historically underserved markets.
Urban and Suburban Locations
Another shift is plans for up to 1,000 metro market stores in cities like Chicago, Los Angeles, and Philadelphia. These locations will have smaller footprints optimized for urban settings.
Traditional suburban growth also remains important, especially in southern states. But the company is reaching saturation levels in suburbs of many major Texas, Florida, and Georgia cities.
Different Formats for Different Markets
Importantly, Dollar General is developing alternate store formats tailored to higher-income suburban areas, lower-income urban neighborhoods, and other distinct customer segments.
For instance, the newer DGX format serves metropolitan regions with stores under 4,000 square feet featuring more fresh foods and grab-and-go meals. Dollar General aims to operate 1,000 DGX locations by 2024.
Distribution and Supply Chain
Supporting Dollar General’s expanding store network is a vast distribution and transportation operation. The company’s supply chain success enables its convenient neighborhood store model.
Distribution Centers
Dollar General operates 17 regional distribution centers (DCs) delivering merchandise to stores. Each facility serves ~700-1,400 locations within a 250-mile radius via third-party trucking partners.
| Distribution Center Location | Year Opened |
|---|---|
| Alachua, FL | 2006 |
| Ardmore, OK | 2005 |
| Bethel, PA | 1998 |
| Fulton, MO | 2015 |
| Indianola, MS | 2002 |
| Jackson, GA | 1994 |
| Jonesville, SC | 2005 |
| Lebec, CA | 2014 |
| Marion, IN | 2002 |
| Maumelle, AR | 2016 |
| San Antonio, TX | 2000 |
| Sugarland Run, VA | 2021 |
| Sumter, SC | 2017 |
| Temple, TX | 2006 |
| Union City, OK | 2003 |
| Walton, KY | 2001 |
| Zanesville, OH | 2001 |
Strategically placed DCs allow two-day direct-to-store shipping almost anywhere in the network. This enables flexible distribution tailored to hyper-local demand.
Vendor-Managed Inventory
Dollar General also utilizes vendor-managed inventory for important product categories. Suppliers store goods in Dollar General DCs, then handle fulfillment to stores based on automatic inventory data. This saves chain resources and keeps key items continually stocked.
Cold Chain
To support grocery and frozen sections, Dollar General has cold chain facilities attached to DCs. Refrigerated fleets then deliver perishables to store backrooms built to hold cold inventory.
Ongoing cold chain expansion provides capacity to grow fresh foods, which are increasingly important traffic drivers.
Backhaul Model
By contracting dedicated fleet partners, Dollar General has an efficient backhaul distribution model. Trucks deliver orders from DCs to stores, then return to DCs with backhaul loads from vendors. This minimizes empty miles and makes the most of fleet resources.
As Dollar General extends its geographic footprint, the company continues investing heavily in distribution infrastructure to enable growth. Efficient supply chain operations ensure stores remain in-stock on localized merchandise customers want.
Technology and Data Analytics
Cutting-edge data science and IT systems provide the foundation for Dollar General’s strategic expansion. The company leverages technology across real estate, merchandising, distribution, and store operations.
GIS Capabilities
Dollar General built an advanced Geographic Information System (GIS) for analyzing potential new store locations. The GIS platform combines demographic data, competitive intelligence, zoning information, drive times, and other inputs on one hyper-local platform.
Sophisticated mapping functionality lets the company visualize trade areas for any site under consideration. GIS analytics help Dollar General evaluate markets methodically and optimize its nationwide footprint.
Merchandising Analytics
At the category and item levels, Dollar General uses data mining to match inventory with consumer demand. The Enterprise Merchandise Planning System tracks sales trends, seasonal fluctuations, and store-specific product performance.
Analyzing this data ensures stores consistently carry the right assortment of merchandise tailored to local shopper preferences.
Forecasting and Replenishment
Dollar General’s supply chain utilizes demand forecasting algorithms to anticipate store needs. Automated inventory management and warehouse systems then optimize distribution center order fulfillment.
This sophisticated forecasting and replenishment process allows the chain to keep shelves stocked with must-have products across thousands of locations.
Operational Efficiency
At the stores themselves, Dollar General leverages technology to improve day-to-day efficiency. Store management systems provide corporate visibility into sales, inventory, payroll, loss prevention, merchandising tasks, and more.
Meanwhile, hourly workers use mobile apps to manage their tasks. Digital tools like electronic shelf labeling also help streamline in-store operations.
Corporate Sustainability
While focused on growth, Dollar General also recognizes its wider corporate social responsibilities. Some key sustainability initiatives include:
- DG Green: Programs to reduce environmental impact across the supply chain. Efforts include recycling, sourcing local produce, energy conservation, and greener distribution.
- Serving Others: Philanthropic giving campaigns supporting literacy, youth education, hunger relief, and other community causes. Dollar General donated over $64 million in 2021.
- Focus on People: Workforce development partnerships, employee safety programs, diversity recruiting, and health/wellness benefits aim to support employees.
- Ethical Sourcing: Supplier standards programs ensure merchandise comes from factories with responsible labor and human rights practices.
While delivering value for shoppers, Dollar General works to positively impact workers, communities, and the planet. This commitment strengthens the company’s foundation for long-term expansion.
Conclusion
Dollar General’s phenomenal growth to 18,000+ stores stems from data-driven real estate, a neighborhood- customized approach, efficient distribution, and technology-enabled operations. The chain turns deep data insights into actionable strategies for site selection, merchandising, supply chain efficiency, and more.
Looking ahead, Dollar General will continue leveraging analytics and optimizing its physical footprint. But the company’s success ultimately hinges on catering to local neighborhoods. Dollar General wins lifelong customer loyalty by embedding stores within communities and providing the merchandise each unique location wants most.
