Family Dollar 2009 Annual Report Download - page 10

Our Merchandise
We provide customers with quality merchandise at everyday low prices. We offer a focused assortment of
merchandise in a number of core categories, such as health and beauty aids, packaged food and refrigerated
products, home cleaning supplies, housewares, stationery, seasonal goods, apparel and home fashions. Our stores
are operated on a self-service basis, and our low overhead enables us to sell merchandise at a relatively moderate
markup. In the typical Family Dollar store, the majority of the products are priced at $10 or less, with many of
the products priced at $1 or less. In fiscal 2009, the average customer purchase was $9.84.
Current Strategic Initiatives
We believe that balancing initiatives targeted to deliver short-term financial results with investments that
may require longer-term development will help us weather difficult macro-environments and enable us to
achieve our long-term financial goals. Our current investment agenda is concentrated around four key priorities:
increase relevancy to the customer, drive increased profitability, manage risk and build great employee teams.
Increase Relevancy to the Customer
As the economic environment changes, we remain focused on increasing our relevancy to the customer. We
are re-aligning the space in our stores to better meet customer demand and improve the in-store shopping
experience. During fiscal 2009, we re-aligned the space in approximately 48% of our stores, adding space for
consumable merchandise and improving in-store signage and merchandise adjacencies. In addition, we continue
to enhance our assortment of food to meet customers’ frequent fill-in food needs, and we are adapting our store
operating hours to provide greater convenience to our customers. We are also expanding our customer research
efforts and creating processes that enable us to apply our research more effectively in our merchandise and store
layout decisions.
We are upgrading our register and point-of-sale technology to enable us to accept additional payment types,
including credit cards and electronic benefit transfers such as food stamps. This upgraded technology also
includes a number of computer-based tools to provide our store managers with better training, analytics and
workflow management. At the end of fiscal 2009, approximately 74% of our stores operated with the technology.
We expect to complete the rollout of this technology to all stores during fiscal 2010. In connection with the
technology, we also plan to begin offering gift cards and merchandise return cards to our customers.
Drive Increased Profitability
In order to drive increased profitability, we continue to invest in initiatives that drive top-line growth, and
we remain focused on cost management. In addition to the initiatives already discussed, we are enhancing our
private label offering and global sourcing efforts and making additional investments to strengthen our pricing
efforts. As customers become more budget-conscious, they value quality private label products at compelling
prices more. We are enhancing our assortment of private label merchandise to reinforce our value perception and
to enhance profitability.
As raw material and commodity prices fluctuate, having an appropriate pricing strategy is critical, both to
reinforce value to the customer and to manage profitability. We have created a structured framework for pricing
decisions that enables us to better balance the need for profitability with the customer’s perception of value. We
plan to continue focusing in this area by refining and expanding our zone pricing initiative. We also plan to begin
utilizing new software to strengthen our price optimization efforts, including promotional and clearance pricing.
To manage global pricing pressures and mitigate the pressure from increased sales of lower-margin
consumable merchandise, we continue to enhance our global sourcing efforts. As a result of these investments,
we have improved our product quality, offering greater value for our customers, while also improving
merchandise markups.
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