Dollar General 2010 Annual Report Download - page 81

10-K
larger retailers in more competitive markets. Our compelling value and convenience proposition is
evidenced by the following attributes of our business model:
•Convenient Locations. Our stores are conveniently located in a variety of rural, suburban and
urban communities, currently with nearly 70% serving communities with populations of less than
20,000. In more densely populated areas, our small-box stores typically serve the closely
surrounding neighborhoods. The majority of our customers live within three to five miles, or a
10-minute drive, of our stores. Our close proximity to customers drives customer loyalty and trip
frequency and makes us an attractive alternative to large discount and other large-box retail and
grocery stores which are often located farther away. Our low cost economic model enables us to
serve many areas with fewer than 1,500 households.
•Time-Saving Shopping Experience. We also provide customers with a highly convenient shopping
experience. Our stores’ smaller size allows us to locate parking near the front entrance where
shopping carts are located to promote efficient navigation of the store. Our product offering
includes most necessities, such as basic packaged and refrigerated food and dairy products,
cleaning supplies, paper products, and health and beauty care items, as well as greeting cards,
party supplies, apparel, housewares, hardware and automotive supplies, among others. Our
typical store hours are 8:00 a.m. to 9:00 p.m., seven days per week. Our convenient hours and
broad merchandise offering allow our customers to fulfill their routine shopping requirements
and minimize their need to shop elsewhere.
•Everyday Low Prices on Quality Merchandise. Our research indicates that we offer a price
advantage over most food and drug retailers and that our prices are highly competitive with even
the largest discount retailers. Our ability to offer everyday low prices on quality merchandise is
supported by our low-cost operating structure and our strategy to maintain a limited number of
stock keeping units (‘‘SKUs’’) per category, which we believe helps us maintain strong
purchasing power. Most items are priced below $10, with approximately 24% at $1 or less. We
offer quality nationally advertised brands at these everyday low prices in addition to offering our
own comparable quality private brands at value prices.
Attractive Store Economics. The traditional Dollar General store size, design and location requires
minimal initial investment and low maintenance capital expenditures. Our typical locations involve a
modest, no-frills building, which helps keep our rental and other fixed overhead costs relatively low.
When coupled with our new stores’ ability to generally deliver positive cash flow in the first year, this
low capital expenditure requirement typically results in pay back of capital in less than two years. Our
stringent market analysis, real estate site selection and new store approval processes as well as our new
store marketing programs help us optimize financial returns and minimize the risks of opening
unprofitable stores.
Our lean store staffing model and centralized management of utilities, maintenance and supplies
procurement contribute to our relatively low operating costs and efficient store operations.
Substantial Growth Opportunities. We believe that we have substantial growth opportunities
through both improved profitability of existing stores and new store openings. We are pursuing a
number of initiatives which we expect to continue to improve the profitability of our existing store base.
In addition, we have identified significant opportunities to add new stores in both existing and new
markets. We believe we have the long-term potential in the U.S. to more than double our existing store
base while maintaining strong returns on capital. See ‘‘Our Growth Strategy’’ for additional details.
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