Business model of Dollar General

Customer Segments

Dollar General has a core strategy of providing basic household needs and other general merchandise items to a broad base of customers.  The company has traditionally targeted low-income families.  In recent years, however, it has expanded its customer segments to include other groups of consumers.  Dollar General’s core customer segments are:

• Low and Medium-Income Families, including households with an annual income of $30,000 or less who are seeking affordable prices for everyday household items;
• Millennials, aged between the early twenties and mid-thirties who prefer affordable options for essential goods, such as cleaning supplies; and
• Budget-Conscious Older Consumers, who are still working but old enough to retire and prefer to be thrift in their purchases.

Dollar General is based in the US and serves customers across 44 of the country’s 50 states. The company does not have a presence across international markets.

Value Propositions

Dollar General provides value to its customers in the following ways:

• Convenient Locations – Dollar General operates a network of stores that are strategically placed in locations that are convenient for its customers, including in a variety of rural, suburban, and urban communities. The company seeks to place its outlets in close proximity to customers, increasing customer loyalty and decreasing the frequency of trips to the store;
• Time-Saving and Efficient Shopping Experience – Dollar General seeks to organize its store interiors intuitively, making products convenient and easy to find and the store itself easy to navigate. This coupled with the company’s convenient opening hours makes the company an attractive prospect for shoppers;
• Broad Product Offerings – Dollar General provides a wide range of products to its customers – including food and dairy, cleaning, health and beauty, and apparel products – enabling the company to act as a one-stop shop for its customers;
• Low Prices on Quality Merchandise – Dollar General seeks to provide its customers with low process on good quality merchandise, advertising more affordable prices than larger food and drug retailers and prices that are competitive with other discount retailers. The company seeks to attract and retain customers by offering branded products and cheap prices; and
• Brand Recognition and Reputation – Dollar General has an established brand name and history dating back to the early 20^th This reputation inspires confidence and trust from consumers.

Channels

Dollar General operates primarily as a brick and mortar retailer. It operates a network of more than 14,000 discount retail stores across 44 US states, with the greatest concentration of retail locations found in the southern, southwestern, midwestern and eastern states.  The company’s stores are on average around 7,400 square feet in size and are located in towns of 20,000 or fewer people.

Dollar General’s retail network is supported by a its supply and distribution channels.  The company operates 15 fifteen distribution centers located throughout the US, with a further two distribution centers currently under construction in Texas and New York.  The company additionally leases other temporary facilities and warehouse space as distribution needs require.  Dollar General’s goods are delivered primarily by third-party logistics firms, supplemented by the company’s own fleet of 79 semi-trailer trucks, with some vendors shipping certain items to stores directly.

Dollar General operates a website at www.dollargeneral.com, through which it is able to deliver offers and advertisements to customers. The website also hosts an online store, through which customers can place orders for delivery.

Customer Relationships

Dollar General offers its products to customers on a self-service basis through its online store, and on a largely self-service basis through its physical retail locations.  In addition to hosting an online store, Dollar General’s website offers customers information on the company’s retail locations, special offers, and products, and allows customers to track their online orders.

At the core of Dollar General’s relationship with customers is its network of retail outlets, through which the company employs thousands of customer service and customer-facing workers.  These employees deal directly with customers on a face-to-face basis, providing assistance, answering questions, handling complaints, and providing direction directly and real time.  It is through this in-store customer service that Dollar General seeks to establish lasting and trusted relationships with its customers.

In addition to the support provided in-store, Dollar General also operates a network of customer support employees across the US.  Dedicated support staff can be contacted via the Dollar General website to deal with complaints, manage product returns, and ensure that online payments are made securely.  The company also offers self-service support to customers through FAQs, delivery information, and purchase information.

Dollar General is additionally able to interact directly with consumers through its various social media accounts – including with Facebook, Twitter, Instagram, LinkedIn, and Pinterest.  The company frequently handles customer issue and publishes updates through these social media channels.

Key Activities

Dollar General operates as a discount retailer, offering a broad selection of merchandise to its customer base, consumables, seasonal items, home products, beauty products, household goods, and apparel. The Company's consumables category includes paper and cleaning products, packaged food, perishables, snacks, health and beauty products, pet supplies, and tobacco products. Its seasonal products include decorations, toys, batteries, stationery, prepaid phones and accessories, and home office supplies. Its home products include cookware, craft supplies and kitchen, and bed and bath soft goods. Its apparel products include casual everyday apparel for infants, toddlers, girls, boys, women and men, as well as socks, underwear, disposable diapers, shoes and accessories.

Key Partners

Dollar General works closely with a network of partner companies and organizations in order to ensure that its products and services are delivered reliably and efficiently to consumers. These partners can be organised broadly into the following categories:

• Advertising Partners, including media and marketing agencies that support and manage Dollar General’s own advertising efforts, as well as various brands and companies that advertise products through Dollar General’s stores and website;
• Vendor and Supply Partners, comprising suppliers of the company’s merchandise, including health and beauty manufacturers, producers of cleaning products, food companies, and wholesalers. In 2017, the company’s largest and second largest suppliers each accounted for approximately 8% of the company’s purchases;
• Distribution Partners, comprising logistics providers and distribution companies that take responsibility for the delivery of products from Dollar General’s distribution centers to its retail outlets;
• Affiliate Partners, comprising websites and online portals that provide affiliate marketing services to Dollar General in return for a small fee; and
• Strategic Partners, comprising various other companies and organizations, with which Dollar General collaborates on joint branding, marketing, and development projects.

In recent years, Dollar General has launched branding partnerships with Kellogg’s and Coca-Cola in relation to National Literacy Month and Halloween respectively.  It has also maintained a strategic partnership with Nielsen to further its customer insight program.

Key Resources

Dollar General’s key resources are its network of physical retail outlets, its catalogue and stock of general products and merchandise, its supply chain and logistics network, its online store, its website and IT infrastructure, its employees – in particular its in-store staff, and its partnerships.

Dollar General notably leases and or owns a large portfolio of properties across the US, comprising its retail and distribution networks. The company has more than 14,000 stores nationwide.  It also leases distribution centers located in California, Oklahoma, Mississippi and Missouri, and owns a further 11 distribution centers across the country.  It also leases and owns office space in Goodlettsville, Tennessee.

As Dollar General bases its business on its ability to provide an efficient and convenient shopping experience to its customers, as such its customer service and in-store customer-facing staff are particularly important to the company, helping to ensure it maintains its reputation.

Cost Structure

Dollar General’s core operating costs relate to its acquisition, storage, and distribution of merchandise to its stores across the US, as well as to the payment of salaries and benefits to its personnel across its retail, distribution, and office networks. The company also incurs costs in relation to the development and maintenance of its online presence, the maintenance of its IT and communications infrastructure, the management of its partnerships, the procurement of external services and equipment, and the implementation of marketing campaigns.

Revenue Streams

Dollar General generates primarily revenue through the sale of general and household merchandise to consumers in the US. It derives revenue from both sales made at its physical retail outlets as well as through its online store.  It also generates a smaller portion of its revenue through the sale of advertising space on its website and in stores to brands. In 2017, Dollar General recorded net sales for the year in the amount of $23.47 billion.