Dollar General 2014 Annual Report Download - page 86

10-K
We face intense competition that could limit our growth opportunities and adversely impact our financial
performance.
The retail business is highly competitive with respect to price, store location, merchandise quality,
assortment and presentation, in-stock consistency, customer service, aggressive promotional activity,
customers, and employees. We compete with retailers operating discount, mass merchandise, warehouse
club, grocery, drug, convenience, variety and other specialty stores. This competitive environment
subjects us to the risk of adverse impact to our financial performance because of the lower prices, and
thus the lower margins, that may be required to maintain our competitive position. Also, companies
like ours, due to customer demographics and other factors, may have limited ability to increase prices
in response to increased costs without losing competitive position. This limitation may adversely affect
our margins and financial performance. Certain of our competitors have greater financial, distribution,
marketing and other resources than we do and may be able to secure better arrangements with
suppliers than we can. If we fail to respond effectively to competitive pressures and changes in the
retail markets, it could adversely affect our financial performance.
Competition for customers has intensified as competitors have moved into, or increased their
presence in, our geographic markets and from the use of mobile and web-based technology that
facilitates online shopping and real-time product and price comparisons. We expect this competition to
continue to increase. In addition, some of our large box competitors are or may be developing small
box formats, and increasing the pace at which they will open the small box formats, which will produce
more competition. We remain vulnerable to the marketing power and high level of consumer
recognition of these larger competitors and to the risk that these competitors or others could venture
into our industry in a significant way. Further, consolidation within the discount retail industry could
significantly alter the competitive dynamics of the retail marketplace. This consolidation may result in
competitors with greatly improved financial resources, improved access to merchandise, greater market
penetration and other improvements in their competitive positions, as well as result in the provision of
a wider variety of products and services at competitive prices by these consolidated companies, which
could adversely affect our financial performance.
Our private brands may not maintain broad market acceptance and increase the risks we face.
The sale of private brand items is an important component of our future sales growth and gross
profit rate enhancement plans. We have invested in our development and procurement resources and
marketing efforts relating to these private brand offerings. We believe that our success in maintaining
broad market acceptance of our private brands depends on many factors, including pricing, our costs,
quality and customer perception. We may not achieve or maintain our expected sales for our private
brands. The expansion of our private brand offerings also subjects us to certain risks, such as: potential
product liability risks and mandatory or voluntary product recalls; our ability to successfully protect our
proprietary rights and successfully navigate and avoid claims related to the proprietary rights of third
parties; our ability to successfully administer and comply with applicable contractual obligations and
regulatory requirements; and other risks generally encountered by entities that source, sell and market
exclusive branded offerings for retail. An increase in sales of our private brands may also adversely
affect sales of our vendors’ products, which, in turn, could adversely affect our relationship with certain
of our vendors. Any failure to appropriately address some or all of these risks could have a significant
adverse effect on our business, results of operations and financial condition.
A significant disruption to our distribution network, to the capacity of our distribution centers or to the
timely receipt of inventory could adversely impact sales or increase our transportation costs, which would
decrease our profits.
We rely on our distribution and transportation network to provide goods to our stores in a timely
and cost-effective manner. Using various modes of transportation, including ocean, rail, and truck, we
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