Dollar General wins on price - Brief Article - Statistical Data Included

DSN Retailing Today, August 12, 2002

ATLANTA -- Can anyone beat Wal-Mart on price? Dollar General can, at least according to the most recent market basket study by DSN Retailing Today and McMillan/Doolittle. Both retailers go to market with an EDLP strategy, but in this situation Dollar General won bragging rights, besting the world's largest retailer by 4%.

Given the positioning of this study, which focuses on the lowest-price item in the category regardless of brand, DSN Retailing Today and McMillan/Doolittle visited a Dollar General in the Atlanta market out of curiosity to see how many items on our list could be found at the dollar store. Consultant Neil Stern, who created the market basket, was surprised by the sheer number of duplicate items. Of the total 47 items in the original basket, 36 were easily located in the dollar store, though one, grain rice, wasn't available in the specified size--so a price-per-ounce was calculated instead.

Of these items, Dollar General's market basket total came to $50.49, $2.13 less than traditional low-cost leader Wal-Mart and $10.57 less than SuperTarget. Kroger was priced $12.57 higher and Publix shoppers paid $23.97 more for the same items at Dollar General. Nor did they have to sacrifice name brands, as 10 items at Dollar General were national brands versus seven at Wal-Mart. All but three items on the grocery list and all four general merchandise/health and beauty care products were available.

"This certainly supports Dollar General's contention that they really do provide customers with a low-priced place to shop," said Stem. "And they run higher margins than supermarkets and higher margins than Wal-Mart as a whole."

The eight dairy and deli items could not be purchased at this particular location. However, had the study been conducted in Texas or Tennessee, the basket would likely be more complete as these are markets where Dollar General has introduced refrigerated cases to stores. It plans to expand this perishables program to another 1,000 stores this year in an effort to stimulate incremental trips with products that drive higher frequency and yield larger baskets, according to Mark Miller, an analyst with William Blair.

While it can be argued Dollar General offers a more down-market alternative than supercenters, for extreme value-conscious shoppers, the retailer accomplishes its objective. "They are giving legitimately good prices to the consumer," said Stern. "Any time you're lower than Wal-Mart on anything, that's a good thing."