Dollar General 2009 Annual Report Download - page 19

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In addition, we believe that our value proposition is attracting customers from a wide range of income
brackets and life stages and that those customers are planning to continue shopping with us for the
foreseeable future.
In 2008, we engaged Nielsen to assist us in updating our proprietary customer research in an effort
to better understand our customers, their purchasing habits and preferences. The results of this study
indicate that our highest frequency and highest spending customers, comprising approximately 50% of
our sales, are those for whom low prices and value are critical to their everyday shopping decisions. In
August of 2009, we updated this study with a customer survey designed to give us insight into recent
changes in our customer base. The results of this survey indicate that, while the description of our core
customer remains the same, our stores are now attracting customers who had not shopped at our stores
previously because of their perception of image or quality. In addition, the percentage of shoppers
classified as one-stop shoppers has increased. We believe that recent additions to our merchandise
offering, improvements to store operations and expansion of operating hours, along with our consistent
value proposition, are resonating well with our existing customers and have been critical to our success
in attracting and retaining new customers. Based on additional proprietary survey results, management
believes that in excess of 95% of our current customers expect to shop our stores with the same or
greater frequency after the economy improves.
Based on Nielsen Homescan Panel estimates of Dollar General shoppers, we estimate that only
41% of the population in our trade areas, defined as the counties in which we have stores, has shopped
at Dollar General in the past year. We believe that the remaining 59% represents an opportunity to
grow our customer base. We are striving to continue to improve on the quality, selection and pricing of
our merchandise and upgrade our store standards in order to attract and retain increasing numbers and
demographics of customers.
Our Suppliers
We purchase merchandise from a wide variety of suppliers and maintain direct buying relationships
with many producers of national brand name merchandise, such as Procter & Gamble, Kimberly Clark,
Unilever, Kellogg’s, General Mills, Nabisco, Coca-Cola and PepsiCo. Despite our broad offering, we
maintain only a limited number of SKUs per category, giving us a pricing advantage in dealing with our
suppliers. Approximately 9% and 6% of our purchases in 2009 were from our largest and second
largest suppliers, respectively. Our private brands rely upon a diversified supplier base. We directly
imported approximately 8% of our purchases at cost (13% of our purchases at retail) in 2009. Our
vendor arrangements generally provide for payment for such merchandise in U.S. dollars.
We have not experienced any difficulty in obtaining sufficient quantities of core merchandise and
believe that, if one or more of our current sources of supply became unavailable, we would be able to
obtain alternative sources without experiencing a substantial disruption of our business.
Distribution, Transportation and Inventory Management
Our stores are supported by nine distribution centers located strategically throughout our
geographic footprint. Of these nine, we lease three and own the other six. We lease additional
temporary warehouse space as necessary to support our distribution needs. We believe that our
distribution network is well-positioned to support our planned growth for the near future. Over the
past few years we have made significant investments in facilities, technological improvements and
upgrades, and we continue to improve work processes, all of which increase our efficiency and ability to
support our merchandising and operations initiatives as well as our new store growth. We continually
analyze and rebalance the network to ensure that it remains efficient and provides the service our
stores require. See ‘‘—Properties’’ for additional information pertaining to our distribution centers.
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