Dollar General 2015 Annual Report Download - page 83

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 discount stores and with many other retailers, including
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. We remain vulnerable to the marketing power and high level of consumer recognition of larger
competitors and to the risk that these competitors or others could venture into our industry in a
significant way, including through the introduction of new store formats. 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 may increase the risks we face.
The sale of private brand items is an important component of our 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 sale
and 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 legal
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
and our vendors move goods from vendor locations to our distribution centers. Deliveries to our stores
occur from our distribution centers or directly from our vendors. Any disruption, unanticipated or
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