No products in the cart.

Dollar General is a corporation that was set up to provide a selection of merchandise like consumables, home products, and apparel to consumers at a lower price than they would get elsewhere. The Dollar General business model is focused on making shopping stress-free and affordable by selling everyday items at low prices to customers looking for both value and convenience.

Dollar General‘s business strategy is centered on creating profitable growth while keeping its image as a low-cost provider and seizing opportunities for growth. The company aims to do so by improving store in-stock positions and continuously offering products at competitive prices, as well as investing in inexpensive labor.

Their target customers are households that make less than 40,000 annually, which might make one begin to wonder how they are able to make any profit at all. In this article, we will be going into the nooks and crevices of the Dollar General business model and the methods they use to make their business thrive while catering to their consumers. 

It all started in 1939 when James Luther — who had struggled to survive after his father’s passing in 1902 by dropping out of school and working on the family farm to provide for his family, as well as becoming a traveling dry goods seller, and even buying and liquidating general stores during the Depression — and his son Cal Turner Sr. pulled together and invested $5,000 each to open a wholesale business which they called J.L. Turner and Son Wholesale.

After failing twice in retailing when he was younger, J.L. decided to try his hand in wholesaling, which kicked off and eventually led him to try his third and final attempt at retailing. The switch to retailing was a great success, creating a boom of over $2 million by the early 1950s. 

By 1955, his son Cal had gotten the idea of a retail store that focused on selling goods for a doll. He got this idea from the Dollar Days promotions held at other department stores. The concept was rather straightforward: No item in the store would cost more than one dollar.

On the 1st of June 1955, they converted one of their Turner’s Department Stores in Springfield, Kentucky, into the very first Dollar General Store. The store was a huge success, and soon they converted all the other department stores they owned. And by 1957, the annual sales from all 29 Dollar General stores hit $5 million. 

Unfortunately, in 1964, J.L. passed away, leaving his son Cal to continue his legacy. Cal didn’t disappoint, and four years later, the company he co-founded with him went public as Dollar General Corporation, raking in annual sales of more than $40 million and generating a net income in excess of $1.5 million. 

In 1965, his son, Cal Turner Jr., joined the company as the third generation Turner, and eventually succeeded his father as president of Dollar General in 1977. Cal Turner Jr. led the company until his retirement in 2002. During the years of his leadership, the company grew massively, owning more than 6,000 stores and generating $6 billion in sales.

Now, the company has become a major discount retailer with over 17,000 locations in 46 states. The founding family’s humble ethic of hard work and friendly customer service has been carried on by the company.

Although it was established by the Turner family, Dollar General is not owned by any of the major grocery chains. It is owned by private investors, such as Kohlberg Kravis Roberts and Citigroup, and public stock investors, as Dollar General is a publicly-traded company.

Dollar General offers a selection of merchandise to consumers at discounted prices that are 20% to 40% lower than those found in grocery stores and drug stores. With this incentive, they have flourished, but the fact that they sell their items at such low prices begs the question of how they actually make money. They accomplish this by acquiring, storing, and distributing merchandise to their stores across the United States, as well as paying salaries and benefits to their employees in a manner that is inexpensive and cost-effective. 

The company’s target consumer comes from a household earning $40,000 or less per year and often lives in areas known as “food deserts”, which means they aim for homes located miles away from grocery stores. The plan was to go to places where Walmart didn’t go. As a result, the majority of its stores are in rural and suburban areas, where it is less expensive to operate.

Dollar General does not own its stores. This keeps real estate costs low. And because the company does not own its real estate, it is easy to relocate stores if things aren’t doing well. A new store costs around $250,000 to open, which is significantly less than what a big-box retailer pays to build new stores. It is one-tenth the size of a typical Walmart store and has a simple design with metal shelves, strip lighting, and low-cost signs. The average shopping trip to Dollar General lasts no more than 10 minutes, and because the store’s designs are simple, the shopping experience is generally straightforward.

Dollar General does not stock every brand and size; instead, they concentrate on the most popular ones. Each of their stores has between 10,000 and 12,000 different products, which is low when compared to a typical supercenter like Walmart, which has around 60,000. Because Dollar General buys in bulk, carrying a limited number of items gives it more negotiating power with suppliers.

Smaller, more basic establishments require fewer employees since they offer fewer items. Unlike Walmart, which has a diverse workforce ranging from greeters to shopping assistants, Dollar General keeps its staffing rather simple. The emphasis here is on getting a good price, which frequently means that customers are willing to give up services. Dollar General is also investing in its workers in order to decrease employee turnover, which is costly to the company. They boast the lowest store manager turnover rate in the industry.

Dollar General produces some of the goods they sell, with over 40 distinct private-label product brands. Because the corporation has better control over production costs and can establish its own prices, these items have bigger margins than national brands. 

Most Dollar General stores do not sell fresh food or perishable items, which have a shorter shelf life and lower profit margins. This contributes to the company’s healthy profit margins. Despite this, Dollar General is trying to expand this segment of the company and become a mid-week shopping destination by making customers visit the store more often to purchase perishables. They currently have fresh vegetables in 300 of their locations. 

Dollar General sells goods in small quantities instead of in bulk to keep the cost of each transaction low. While the costs remain below $10, it may look like you’re getting a better deal, but you are probably spending more per ounce or per item. However, the lower purchase price serves its primary consumer well, as they may not have the disposable cash to buy in bulk.

Dollar General is always trying to minimize expenses in its supply chain. They aim to grow their own private fleet in order to regulate delivery times and guarantee that routes are more optimal so that vehicles do not waste time on transportation networks. The company believes that, by expanding its private fleet, it would decrease its susceptibility to third-party carrier pricing fluctuations.

The Dollar General Business Model can be explained in the following business model canvas:

To download Dollar General Business Model Canvas today just enter your email address!

Dollar General’s customer segments consist of:

Dollar General’s value propositions consist of:

Dollar General’s channels consist of:

Dollar General’s customer relationships consist of

Dollar General’s revenue streams consist of:

Dollar General’s key resources consist of:

Dollar General’s key activities consist of:

Dollar General’s key partners consist of:

Dollar General’s cost structure consists of:

Here’s a breakdown of Dollar General’s SWOT analysis:

Dollar General has achieved and will continue to achieve its aim of delivering stress-free and economical shopping for all of its customers. They save time by concentrating on their home. They sell necessities and other valuable items, while keeping their customers at the center of all they do. Their actions are motivated by the desire to serve others, both customers and workers, as well as members of their communities.

Dollar General is synonymous with convenience, high-quality goods, and affordable rates. Dollar General has been dedicated to its objective of serving others since its inception in 1939, and has stuck to it through the years.

PRODUCTS DOWNLOADS Super Guides, Spreadsheets and Powerpoint Templates CHECK IT OUT

RECEIVE OUR UPDATES NEWSLETTER Want Receive new Business Model Analysis direct on your inbox? Subscribe now and don't miss any new posts! Leave this field empty if you're human:

All you Need to Know about Business Model Canvas Innovation Subscribe to the blog

RECEIVE OUR UPDATES NEWSLETTER Want Receive new Business Model Analysis direct on your inbox? Subscribe now and don't miss any new posts! Leave this field empty if you're human:

Username or email address *