Dollar General Ready to Drop Prices On the Competition

Discussion
Dec 12, 2012

You know competition has to be tough when the nation’s largest dollar store chain announces it is looking at dropping prices to compete for market share during the Christmas holiday season.

Dollar General, which just announced an increase in same store sales of four percent for the last quarter, said it would ramp up promotions (i.e., cut prices) on categories such as cereal and coffee to drive store traffic and grow its business.

"Although our performance over the Thanksgiving weekend and start of the holiday season has been encouraging, we continue to be cautious for the remainder of the year," said Rick Dreiling, chairman and chief executive officer of the chain, in a statement. "Dollar General is keenly focused on our ability to capture market share, build and maintain customer loyalty and deliver strong financial returns that support our sustainable growth for the long term."

Mr. Dreiling said Dollar General’s customers continue to face economic pressures that aren’t made any better by what they see taking place in the nation’s capital.

"Every time you turn on the television, there’s a bunch of guys in a suit who are frowning, telling you that the world is going over a fiscal cliff," Mr. Dreiling told Bloomberg News. "The customer is fatigued, they’re tired, they’re scared."

What do you make of a competitive environment in which Dollar General management believes it has to offer hotter deals to maintain or grow its market share? Do you think daily news coverage of the “fiscal cliff” is affecting the purchasing behavior of dollar store shoppers?

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17 Comments on "Dollar General Ready to Drop Prices On the Competition"


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Max Goldberg
Guest
9 years 9 months ago

Dollar General is using promotions to spice up its marketing campaigns and offer something different to consumers. In that regard, it is behaving like most other retailers.

Even though the economy is recovering, many consumers are still watching every dollar they spend. They are looking for deals. Dollar stores, by their very names, offer value that consumers can understand. Now they will have even more value.

It has little to do with the bloviating coming out of Washington. Consumers tuned that out long ago. They are looking for value.

Mark Heckman
Guest
9 years 9 months ago
Despite the constant news of the perils of the “fiscal cliff,” consumer confidence still seems to be relatively high and given the results of the recent national election, I am not convinced that most consumers are paying that much attention to macro economic issues and debates, but rather their own household economics. While the health of the economy is tenuous, personal economies appear to be stable or slightly improving. With that said, “price” remains the primary consumer driver for most Americans. Mr. Dreiling’s background is supermarkets and his approach to defending or growing market share understandably reflects measures that have worked for him in the past, namely lowering prices and increasing promotions. While there is always risk in doings so, given sales and market share do not always immediately flow from price reductions, Dollar General is picking categories that have high household penetration and a bit more inherent margin to manipulate. That is smart. However, price reductions and promotions are easily replicated by the competition. What remains to be seen is if these measures work… Read more »
Steve Montgomery
Guest
9 years 9 months ago

Walmart and others are reacting to the pressure on their sales that the dollar stores have created by emphasizing their own low prices. As been discussed in recent RetailWire columns, the number of dollar stores continues to grow as they add new items and customers, and they have been experiencing larger sales increase (albeit on a far lower sales base) than has Walmart or other big box retailers. It is only natural for Walmart to say enough is enough and work to lure back some of the dollar store shoppers. Thus the pressure put on Walmart generates pressure back on the dollar stores.

The fiscal cliff is a serious issue for the country but I doubt the news coverage it is receiving is changing the average dollar store customer’s shopping habits. I do think the overall current economy has created more customers with a dollar store mentality.

Dick Seesel
Guest
9 years 9 months ago

First, I don’t believe that constant coverage of “the fiscal cliff” on the cable news and business channels has a strong impact on the shopping behavior of dollar-store consumers. It’s generally agreed that any increases in tax revenue are going to come from higher tax brackets, closed loopholes and fewer deductions—whenever such an agreement is reached. (And the separate discussion about luxury retail suggests that these expectations are already “baked into” the behavior of higher-end shoppers and the equity market.)

So there is a simpler explanation: It’s more likely that Dollar General is lowering prices in response to its discount and other dollar-store competition, and in an effort to drive traffic and market share before the holidays.

Frank Riso
Guest
9 years 9 months ago

I do not think the retail customer base is as much concerned with the fiscal cliff as the press and our political system. The majority of them believe this political tennis match will end as soon as the American government saves the tax payers once again by the end of the year or at the very last minute.

Dollar General may also be feeling the effect of too many dollar type stores and needing to set itself apart from the others. Sometimes I wonder if we have an equal number of convenience stores, pizza shops and dollar stores to keep a full balance in each strip mall in America. Competition is the best way to keep any retailer active and DG is seeing plenty of it.

Gene Hoffman
Guest
Gene Hoffman
9 years 9 months ago

There are too many retailers chasing the available dollars this holiday season (that’s Christmas). That’s the challenge for most retailers including Dollar General.

The daily news coverage of the “fiscal cliff” is only penetrating the skulls of about 10% of Americans. Most consumers have heard of the “fiscal cliff” but a much lesser number know what the heck “fiscal cliff” means or possibly foretells. That might also include the main negotiators too. The motivator of purchasing behavior is mainly being affected by the weak economy that has lasted too long, and hopeful expectations.

Zel Bianco
Guest
9 years 9 months ago

In the current environment, ALL retailers need to offer “hotter” deals than the competition, and not just the dollar channel, but whichever channel it may be. Retailers are hard pressed to make their sales figures this holiday season and have been pulling out all the stops this year, as we have seen with retailers’ store openings on Thanksgiving and the time leading up to Christmas.

Consumers are on the lookout for deals and comparing prices from retailer to retailer, not to mention the increased internet shopping. Brick and mortar retailers need to get consumers in the door and having “hot” deals will hopefully bring them in. I feel that consumers are being more cautious in their spending this holiday season due to the amount of news coverage and uncertainty of the impending fiscal cliff, and depending upon the outcome from Washington DC within the next couple of weeks, we could see a slow start to the new year.

Robert DiPietro
Guest
9 years 9 months ago

First off, the consumer has tuned out Washington—it’s just noise at this point. There hasn’t been a positive message in months.

A 4% comp is pretty good when you look at other retailers. I think you can ‘deal’ your way to growth for so long without squeezing margins and training the customer to only shop when it’s a hot deal. It is a very slippery slope.

Justin Time
Guest
9 years 9 months ago

Dollar General is taking advantage of its deep store base and internet exposure. Everyone is looking for the next great deal. I really think this move is more competitive in nature than just a direct response to the media’s daily countdown to the fiscal cliff.

Tony Orlando
Guest
9 years 9 months ago

I have to deal with this daily as most of you know. Dollar General is trying to grow sales by way of more deep discounting, and go ahead and see what happens to the bottom line. The huge advantage they have is a very low wage rate, with 2 to 3 workers in the entire store. Keeping everything self-serve, and making it simple will generate the profits they need to keep going.

This makes it tough for us who give the extra services, in our Deli’s, Bakery’s, and Meat Deptartments. Keeping our labor costs down is really hard to do, so the advantage goes to DG, unless I want to cut service to the bone. The battle continues for the consumers, and it is not going to get any easier for those of us who are in the game.

Richard J. George, Ph.D.
Guest
9 years 9 months ago

This has nothing to do with the “fiscal cliff” and everything to do with Walmart’s “Smash Mouth Pricing” program that has gained it share from traditional supermarkets and drug stores. This is a pre-emptive, defensive move by Dollar General to protect it from suffering the erosion of business that supermarkets and drug stores have experienced as a result of the Walmart pricing offensive.

Gordon Arnold
Guest
9 years 9 months ago

The question that I see all over the internet and is heard over and over again on the sales floor after cyber Monday is “Where did everybody go?” This seems strange for any recovery or end to unemployment increases. But it’s true, there is a shortage of buyers for the mountains of inventory out there.

We, both IT and Brick & Mortar retailers, have reduced store associate numbers and pay plans, increased store hours, slashed shipping charges and reduced inventory purchase plans with little or no effect.

So why not have a sale on popular inventory items and hope for some good old fashion impulse purchases? This will surely get people’s minds off how much better things are getting and get them back into the market right now when we need them the most. I think not! This is just price slashing to buy market share and siphon from future sales when increased tax burdens make buys more difficult.

H. Douglas Walker
Guest
H. Douglas Walker
9 years 9 months ago

I think the “fiscal cliff” news reports are scaring consumers. Consumers are scared of another recession if not something worse. The problem with dropping prices in this economic climate is if you drop your prices too low, no matter how much you sell you are not generating enough profit to cover your overhead.

Verlin Youd
Guest
9 years 9 months ago

Looks like competition working in the marketplace, plain and simple.

Chandan Agarwala
Guest
Chandan Agarwala
9 years 9 months ago

Economic uncertainty is forcing buyers to postpone decisions for consumer durables and high investment items. Certainly, marketers of essential items can seize the opportunity to leverage price-sensitive nature of buyers. But they need to be watchful about the bottom line too. Better cashflow management and efficient technology backbone can help them to reduce operational costs, and support margins while offering discounts.

Alexander Rink
Guest
9 years 9 months ago
Retailers are facing an unprecedented level of competition, particularly focused around price. Consumer power has increased significantly as shoppers benefit from the unprecedented level of product information and price transparency accessible to them instantaneously through mobile devices. No retailer is immune, not even the dollar store. Where consumers in the past just assumed that a dollar store was priced competitively, they can now easily access the information to verify or disprove that assumption—and the key is that it takes them little to no time to do it. A quick check on Amazon.com will often reveal better prices; for example, comparing Paris Hilton Can Can 1 fl oz perfume on both Dollar General and Amazon, reveals that even after shipping is included, Amazon is still a few dollars less expensive, coming in at around $20 vs. $25 at Dollar General. The antidote for retailers, even Dollar stores, is to ensure they have accurate and timely competitive price intelligence in order to optimize their own pricing to their offering. As for the Fiscal Cliff, I see it… Read more »
Marla Simpson
Guest
Marla Simpson
9 years 9 months ago

Dollar General would be better served instead of putting a store on every corner to actually pay their managers a wage comparable to the amount of work that they expect. They are quickly becoming the Starbucks or Office Max for the Dollar store world. They are expanding too fast and with locations too close together for either location to keep doing well. They do many things well but like many companies the higher ups tend to look at things that are not as important as taking care of the customers and store conditions.

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