Memo of Dollar General

In: Business and Management

Submitted By yareet
Words 3199
Pages 13
Relevant Economic Trends With the exception of supercenters such as Costco and BJ’s, the fastest-growing portion of the overall retail industry in the United States during the past decade has been in the dollar store segment. From 2000-2005 dollar stores had a compound annual growth rate (CAGR) of 10.2% which was nearly double the 5.6% CAGR in the retail industry as a whole. Sales from these discount stores were $24.7 billion in 2000 and were expected to more than double to $51.1 billion in 2009 (Exhibit 8). Two main drivers fueled this growth trend. The first was a cultural shift in consumers towards a bargain-based mentality. This was spurred by an increased presence of retailers with a low cost strategy including Wal-Mart, Sam’s Club, and Target over the past three decades. The second was the rising number of Americans falling below the poverty line as well as the number of people on fixed incomes due to the rapidly aging population resulting from the baby-boom after World War II. While the CAGR of dollar stores was forecasted to slow to 6.2% during 2005-2009, the actual decrease is likely to be smaller as more consumers try to stretch their dollars further through these retail outlets because of the global economic downturn of 2008.
Industry Analysis Dollar General (DG) operates as an extreme-value retailer in the dollar store segment of the retail industry. Other categories that dollar stores fall under are single-price-point retailers, close-out retailers, and limited assortment grocery retailers. These retailers often operate in a small-box format offering a focused assortment of goods. This combined segment achieved significant growth starting in the 1990’s because of a shift in their product mix. Much of DG’s growth during this period resulted from adding household and highly consumable products at everyday low prices (EDLP) in addition…...

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