How Dollar General Is Disrupting Grocery

The New Corner Store

Since 2019, Dollar General has been expanding the availability of fresh food at its stores as grocery chains consolidate and close locations, and more consumers seek a nearby one-stop shop for healthy perishables and essentials. That year, the retailer launched its DG Fresh initiative aimed at adding fresh and frozen food products to store assortments and enhancing distribution of those cold-chain consumables.

At the end of 2020, around 1,100 Dollar General locations offered perishable grocery, including many of its Dollar General Market stores. The company plans to add produce to approximately 700 more stores in 2021, bringing the total number of stores that carry produce to more than 1,800.

“DG Fresh continues to be the largest contributor to the gross-margin benefit we are realizing from higher initial markups on inventory purchases, and we expect this benefit to grow as we continue to scale this transformational initiative,” Vasos said.

Another important goal of DG Fresh is to increase sales in the fresh food categories, he added.

“We are pleased with the success we are seeing on this front, driven by higher overall in-stock levels and the introduction of new products in select stores being serviced by DG Fresh,” Vasos observed.

In 2021, Dollar General plans to further accelerate the rollout of additional fresh offerings, including both national and private brands, as the retailer looks to further optimize its assortment while increasing its relevance with customers.

“We believe DG Fresh provides a potential path forward to expanding our produce offering to more than 10,000 stores over time as we look to further capitalize on our extensive self-distribution capabilities,” Vasos said.

In total, Dollar General’s replenishment network is now distributing to more than 16,000 stores from 10 facilities. Dollar General plans to open two new DG Fresh distribution facilities this year, and add tens of thousands more cooler doors to stores.

“Our cooler expansion program continues to be our most impactful merchandising initiative,” Vasos said. “During 2020, we added more than 62,000 cooler doors across our store base. In total, we expect to install more than 65,000 cooler doors in 2021 as we continue to build on our multiyear track record for growth in cooler doors and associated sales.”

At its traditional stores that have been remodeled with 22 coolers, the company typically sees a 4% to 5% rise in same-store sales. At its larger stores, where there’s room for 34 higher-capacity coolers, there’s a 10% to 15% rise in same-store sales.

In addition to the margin benefits associated with DG Fresh and the retailer’s Non-Consumables Initiative, the company continues to pursue additional opportunities to enhance gross margin, including improvements in private-brand sales, global sourcing and supply chain efficiencies.

“Our plans for 2021 include further expansion of our private fleet, which accounted for more than 20% of our outbound fleet at the end of 2020,” Vasos said. “Reducing stem miles is also an important contributor to these efforts, and the recent opening of our Walton, Ky., dry distribution center is expected to drive additional efficiencies as we move ahead.” The company’s private fleet program has grown from 80 tractors at the end of fiscal 2017 to more than 700 tractors and more than 550 drivers in spring 2021.

Dollar General recently embarked on a hiring spree to support all of these initiatives.

In April, the company said that it’s planning to hire up to 20,000 new employees this spring to support efforts across its store, distribution, transportation and corporate operations. The company also revealed an employee training partnership with Waterloo, Ontario-based Axonify to enhance business learning and development for its more than 157,000 front-line, supply chain and corporate employees.

For the time being, the retailer says that it’s seeing increased labor productivity as a result of its Fast Track initiative, an in-store replenishment program that optimizes operations at the warehouse to speed up shelf stocking and decrease out-of-stocks. The second component of Fast Track is self-checkout, which was available in more than 1,600 Dollar General stores at the end of 2020. The company is on track to have self-checkout in the majority of its stores by the end of 2022.