Sustained Excellence Drives Customer Loyalty at Dollar General

In sports, sustained excellence over a substantial period of time is a daunting task. In retail, it’s the same thing, yet Dollar General has posted sustained excellence and yielded great customer loyalty during an extended period of time.

Dollar General CEO Todd Vasos discussed his company’s long stretch of success and brand loyalty during Corporate Investor Day held on March 24.

“If you look, 26 consecutive years of same-store sales growth,” Vasos said, according to Seeking Alpha. “I’m not sure who else has put those kinds of numbers up, but I bet it would be hard-pressed to find folks, especially in consumable retail, that have put up these types of numbers. And the great thing here is over 26 years, obviously there have been good economies and there have been bad economies. There have been recessions and great recessions and there has been a time of good activity, but you can see we flourished through all of those times. And I’m really fond of saying that in good times our customers have a little bit more money to spend and in tougher times, they need us more. They need us because of our EDLP (Every Day Low Price) stance and because they know they can get the products they know and trust at Dollar General.”

Another key metric Vasos noted is unit growth.

“But the important thing here is to remember that we like to see unit growth growing faster than dollar growth,” Vasos explained. “That may be somewhat counter-intuitive, but when units are driving through the box, we know the sales will come and we’re not concerned about trade down. I’d rather a customer walk out of our store, if she comes in with $10, with five or more items versus one or two items. And so units are very, very important to our consumer to be able to get the value that she needs at the price she needs. So units should always grow a little bit faster than dollars.”

A huge piece of Dollar General’s success lies in its pricing model.

“Our pricing model has been unchanged for many years now, but we’re very proud to say that our prices are at parity with mass, about 20% lower than grocery every day on the shelf, and about 40% lower than drug,” Vasos said. “When you look at what our consumer looks to at Dollar General, it is getting the item that she wants, but at the price she can afford. It’s always about the intersection of value and convenience and it’s hard to get your head wrapped around that sometimes, especially when you don’t live the life of our core consumer.  But she is always looking at a way to stretch her budget and always looking to better her family in some way. And we offer that through the value that we create through our category management processes, but also through that pricing model that we rigorously go after.”

What’s more, Vasos noted that Dollar General checks prices every two weeks in its top 250, and across its entire 10,000-SKU portfolio about once a quarter, against again all the disciplines of mass grocery and drug.

“We know every two weeks exactly where we stand on retail prices on the shelf,” Vasos said. 

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