Dollar General 2007 Annual Report Download - page 6

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store. Of our 8,222 stores operating as of February 29, 2008, more than half serve communities
with populations of 20,000 or less. We believe that our target customers prefer the convenience
of a small, neighborhood store with a focused merchandise assortment at value prices. Our
Dollar General Market® stores are larger than the average Dollar General store, having on
average approximately 17,000 square feet of selling space, and carry, among other items, an
expanded assortment of grocery products and perishable items. As of February 29, 2008, we
operated 57 Dollar General Market stores.
Our Merchandise. Our merchandising strategy combines a low-cost operating structure
with a focused assortment of products, consisting of quality basic consumable, household,
apparel and seasonal merchandise at competitive everyday low prices. Our strategic combination
of name brands, quality private label products and other great value brands allows us to offer our
customers a compelling value proposition. We believe our merchandising strategy and focused
assortment generate frequent repeat customer purchases and encourage customers to shop at our
stores for their everyday household needs.
Our Prices. We distribute quality, consumable merchandise at everyday low prices. Our
strategy of a low-cost operating structure and a focused assortment of merchandise allows us to
offer quality merchandise at competitive prices. As part of this strategy, we emphasize even-
dollar prices on many of our items. In the typical Dollar General store, the majority of the
products are priced at $10 or less, with approximately 30% of the products priced at $1 or less.
Our Cost Controls. We aggressively manage our overhead cost structure and typically
seek to locate stores in neighborhoods where rental and operating costs are relatively low. Our
stores typically have low fixed costs, with lean staffing of usually two to three employees in the
store at any time. In 2005 and 2006, we implemented “EZstoreTM”, our initiative designed to
improve inventory flow from our distribution centers, or DCs, to consumers. EZstore has
allowed us to reallocate store labor hours to more customer-focused activities, improving the
work content in our stores.
We also attempt to control operating costs by implementing new technology when
feasible, including improvements in recent years to our store labor scheduling and store
replenishment systems in addition to other improvements to our supply chain and warehousing
systems.
Recent Strategic Initiatives—Project Alpha. In 2007, we executed strategic initiatives
launched in the fourth quarter of 2006 aimed at improving our merchandising and real estate
strategies, which we refer to collectively as “Project Alpha.” Project Alpha was based upon a
comprehensive analysis of the performance of each of our stores and the impact of our inventory
management model on our ability to effectively serve our customers.
The execution of this merchandising initiative has moved us away from our traditional
inventory packaway model, where unsold seasonal, apparel and home products inventory items
were stored on-site and returned to the sales floor to be sold year after year, until the items were
eventually sold, damaged or discarded. Project Alpha is an attempt to better meet our customers’
needs and to ensure an appealing, fresh merchandise selection. In connection with this initiative,