Dollar General 2009 Annual Report Download - page 14

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 more than 60% 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 2,000 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 and
offers quick store navigation. Significant work to upgrade our in-store shopping experience and
improve shopping efficiency over the past two years include improved signage and product
adjacencies, better organized and stocked shelves, efforts to unclutter aisles and emphasizing the
use of shopping carts. We attempt to adjust our store operating hours to meet the needs of our
customers. 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. This broad offering allows our customers to fulfill their
routine shopping needs and minimizes 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. In Dollar General stores, most items are priced below $10, with
approximately 25% at $1 or less. We offer quality national 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 design, 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.
Moreover, the financial performance of our recently-opened stores appears to be outpacing many of
our existing stores, which we believe is a result of significant enhancements in recent years to our
market analysis, real estate site selection, new store approval processes and new store marketing
program.
Our lean store staffing model contributes to our relatively low operating costs and efficient store
operations.
Substantial Growth Opportunities. We believe we have substantial growth opportunities through
both improved profitability of existing stores and new store openings. We are pursuing a number of
initiatives to drive same-store sales growth, increase gross margins and reduce operating costs, which
should 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 or
improving our return on capital. See ‘‘Our Growth Strategy’’ for additional details.
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