Dollar General SWOT Analysis 2024: A Well Researched Report

Dollar General is a household name for people who live in rural states of the USA and become popular over the decades for its extraordinary services. We will learn more about how it got there in this Dollar General SWOT analysis.

Dollar General: Company Overview

Dollar General began in 1939 as a family business called Turner’s. By 1955, the name changed to Dollar General Corporation. Over the next 70+ years, the discount retailer rapidly expanded across the US. Today, Dollar General operates over 19,400 stores in 48 states, with plans to reach 50 states soon.

With around 170,000 employees, Dollar General generated over $39.036B in revenue in 2023. Now one of the largest discount retailers domestically, Dollar General continues serving small, rural areas with convenience and ultra-low prices, a founding principle since its first five-and-dime store eight decades ago.

Product & Services of Dollar General
Clothing | Cleaning supplies | Home decor | Health & beauty aids | Pet supplies | Toys | Seasonal items | Grocery

Dollar General Competitors
Dollar Tree | Walmart | Target | Costco | Walgreens | Cents Only | Big Lots

Did You Know?

Although known for affordable store prices, Dollar General surprisingly does not offer coupons or accept manufacturer’s coupons from shoppers.

Strengths – Dollar General SWOT Analysis

Strong Presence: According to data, Dollar General operates over 19,414 stores in 47 US states and has been planning to open 1,050 new stores in 2023. As a result, Dollar General’s extensive presence allows it to serve customers in small, rural areas often overlooked by big-box retailers.

Efficient Operations: With stores averaging just 7,400 square feet, Dollar General keeps real estate and operational costs low. Besides, centralized distribution and lean staffing optimize efficiency, with SG&A expenses just 22.3% of sales in 2023.

Loyal Customer Base: By offering a mix of private brands and name brands priced at $10 or less, Dollar General appeals to lower-income shoppers seeking deals. According to data, doing these drives customer loyalty and frequent shopping trips, with average customers visiting stores 1.9 times per month.

Weaknesses – Dollar General SWOT Analysis

Low R&D Spending: If we look at the data, Dollar General invests minimally in R&D compared to rivals, as the company only spent $83M in the last quarter of 2023. At just 0.1% of sales, R&D limits the development of private brands and innovations tailored to its customer base, whereas Walmart spends over 1% by comparison.

Slow Tech Adaptation: With only 15% of e-commerce sales, Dollar General lags in digital capabilities in today’s market. Compared to current trends and options, the lack of scan-and-go checkout, digital coupons/circulars, and limited delivery options inhibit omnichannel growth compared to discount peers.

Unbalanced Portfolio: While convenient for fill-in trips, small formats, and lean SKU assortment leave Dollar General overexposed to essentials. Besides, categories like household supplies and perishables drive over 20% of sales and raise inventory risk relative to more diversified retailers.

Opportunities – Dollar General SWOT Analysis

Market Expansion: As mentioned, the company planned to open over 1,050 new stores in 2023, furthering its rural US footprint. With opportunities to add tens of thousands more locations long-term, Dollar General has considerable room for store network growth beyond its nearly 20,000 current stores.

Strategic Partnerships: Partnerships with suppliers, shippers, and external fulfillment firms could strengthen capabilities in perishables, direct imports, omnichannel retail, and last-mile delivery to drive efficiency, margins, and traffic – areas key competitor Dollar Tree has focused on.

Private Labeling: Further expanding aggressively into private brands across grocery and household categories can boost margins by 3-5 points over national labels while deepening customer loyalty. Though Dollar General’s private label sales topped 30% in 2023, reaching over $17B, more exclusives and premium tiers would differentiate offerings.

Threats – Dollar General SWOT Analysis

Highly Competitive: The discount retail space is intensely competitive and saturated. Rivals like Dollar Tree, Walmart, Aldi, Family Dollar, and variety stores are expanding aggressively nationwide with their small formats, compressing market share for all players, including Dollar General.

Rising Costs: Elevated transport, wage, and commodity costs driven by high inflation pressure margins with limited capacity for Dollar General to raise prices further without deterring its fixed-income shopper base. As a result, gross margins narrowed to 29.01% in 2023, down over 2 points year-over-year.

Economic Fluctuations: Recessions disproportionately impact Dollar General’s core customer segment of low-income households. Not to mention, traffic fell sharply to same-store level in prior downturns, and continued high inflation threatens to bring another economic pullback, further challenging consumer spending power.

[Bonus Infographic] SWOT Analysis of Dollar General

Recommendations for Dollar General

Here are some recommendations for Dollar General;

• Allocate more resources to product R&D, targeting at least 0.5% of sales to start. It can boost progress in owned brands, store innovations, and supply chain capabilities.
• Accelerate investments in digital platforms and tools like scan-and-go checkout, seamless loyalty programs, and personalized promotions to drive store traffic, transaction sizes, and data analytics.
• Pursue acquisitions or partnerships in areas like pharmacy, health and wellness, pet supplies, and services to diversify product mix beyond essentials, reducing inventory and sales volatility.
• Build out larger distribution centers and inland ports for imports to gain transport scale. And renegotiate haulage rates and pursue direct-sourcing programs in crucial categories like grocery to shield margins.

Frequently Asked Questions (FAQs)

Final Words on Dollar General SWOT Analysis

While Dollar General maintains key strengths in its widespread retail footprint, value proposition, and operations, the company faces technological adaptation, portfolio diversity, and innovation weaknesses. However, Dollar General has considerable opportunities to expand its rural US store base, boost private brands, and form strategic partnerships to enhance omnichannel capabilities. However, these efforts are threatened by an intensely competitive discount retail climate, inflationary pressures, and economic sensitivity among core low-income shoppers.

References

• Wikipedia contributors. (n.d.). Dollar General. Wikipedia.