Discount Variety Retail Chain Dollar General (listed NYSE: DG) CEO Todd Vasos is looking to refocus the company’s efforts amid a challenged retail landscape.
The value retail leader recently spoke to investors following the company’s earnings release, stating it would be looking at business “through the eyes of the customer” in order to “get back to basics” across its store, supply chain, and merchandising operations.
“We have spent the last several weeks taking a fresh look at all areas of our business, as well as the challenges and opportunities in front of us,” said Vasos, emphasizing that the initiative is not about rebuilding a team or organization “but about refocusing efforts already underway.”
Stores
As part of previously announced plans, the company is investing about $150 million in store labor hours this year, though the allocation of those funds will be shifting. In order to drive increased returns, Dollar General is removing some funding from its smart teams, transferring it to its store team efforts to focus on customer service and store-level inventory management activities.
Specifically, self-checkout will see some changes.
Self-checkout, previously an area that retailers heavily invested in, is seeing a lot of pull back over concerns of growing shrink rates. A study of retailers found that retailers with self checkout had 4% higher rates of product loss.
Dollar General will be putting a lower emphasis on the technology, shifting more labor to front-end activities to have an increased “visible presence” of associates at the front of stores.
“While self-checkout has contributed to the convenient proposition for our customers in certain stores, it does not reduce the importance of a friendly, helpful employee who is there to greet customers and assist while the checkout process is happening,” said Vasos.
A second area of focus will be inventory management, supporting store team associates to improve on-shelf availability.
“To do this, we are reallocating some of our labor investments toward store level inventory management processes including an even greater focus on getting product onto our shelves more quickly,” he said. “We are also reducing the span of control for our district managers, which will provide more opportunity for engagement with our store managers and their teams, and more consistency and execution across the store base.”
Vasos expects this to also have benefits related to staff retention at the store manager level where turnover is high, ultimately trickling down to improved customer experiences.
Additional Store Plans for 2024
Heavier emphasis on rural stores (80% of new stores planned within these communities)
90% of new stores and relocations will be in larger store formats
30 new pop shelf locations
15 new Mi Super Dollar General stores in Mexico
70% of remodels will be in larger store formats
Supply Chain
Across the company’s supply chain, Vasos said the company will be focusing on SKU rationalization and on-time-and-in-full (OTIF) truck deliveries.
Regarding inventory, optimization efforts will include a closer look at Dollar General’s product offerings and introducing productivity improvements to distribution centers. Currently, the company has between 11,000 and 12,000 total SKUs in stores today, depending on format.
Changes include optimizing product layout across facilities, improving communications for performance standards and expectations, and standardizing system configurations.
“Now that we're past the capacity constraints we experienced last year, we are reducing the number of temporary outside warehouse facilities being used to store products as inventory flows more effectively to and through our existing distribution centers,” he added.
“By better leveraging these existing distribution centers and taking advantage of the new permanent facilities we have opened over the last year, and those we will open next year, we believe we can significantly reduce the amount of temporary warehouse space needed.”
Q4 may see the phasing out of some of these temporary facilities in order to lower distribution and transportation costs, and improve the customer experience and drive increased sales.
Merchandising
Keeping value for consumers at the core, Dollar General said it is in good shape regarding everyday pricing, but it will be looking to highlight private brands and other savings opportunities, maximizing promotional activity.
“Beyond these opportunities for our customers, we have also challenged our merchants to consider how they can drive simplification for our stores and supply chain as well with meaningful SKU rationalization as one of the most immediate areas of focus,” he said.
“To that end, we have identified several opportunities to eliminate certain SKUs that have become less productive first, by moving them out of our DCs and then ultimately to our stores to sell through,” Vasos added.
The efforts, he said, should help further reduce inventory and shrink, simplifying operations across both stores and distribution centers, and introducing more long-term efficiencies.
Read more: Dollar General to ‘Get Back to Basics’ As it Refocuses Store, Supply Chain, and Merchandising Strategies (risnews.com)
