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Striving for seamless store execution

BY Jim Frederick

Greg Sparks, EVP Store Operations, Dollar General

How does Dollar General maintain a consistent quality presentation and high standards for product display, merchandising execution, customer service and store appearance across thousands of locations throughout the United States?

(Click here  to download the full special report.)

It takes close collaboration between the merchants and store operations groups, clear guidance for store managers on executing merchandising programs, and open lines of communication between the store support center and regional, district and store management, said Greg Sparks, EVP store operations.

“With 11,000-plus stores, you have to have a pretty seamless process,” Sparks noted. That’s why “we have a very well organized monthly activity guide from the merchants to every store, where every square foot of the store is mapped out regardless of store size, format size, shelf size, market demographics, etc.”

“It’s pretty seamless for the store managers and their teams to execute … [with] a lot of clear direction from the merchants,” said Dollar General’s top operations manager. “We try very hard to keep store managers and their teams focused on execution.”

One clear advantage for the huge discount chain is that many of its store support center decision-makers have experience in both merchandising and store operations, Sparks said. “It’s a very collaborative effort, and we understand each other’s perspective,” he added. “The operators let the merchants know what’s working well and what’s not, and vice versa. That’s been very helpful for us.”

Although purchasing and planogramming of store sets is handled by departments at the company headquarters, “we do have some regional plannograms” to accommodate local purchasing patterns and conditions, said the head of store operations. “For example, our beach stores have an extended line of beach products in spring and summer, and we give them more flexibility to work with their local vendors to add more items. So if our store or district managers out in the field identify an opportunity, we have a process where the field can work with the merchants to try something locally.”

Buying, however, is done by groups at the store support center, even for items that may be locally sourced for a single cluster of stores in one geographic area, like a hypothetical special cookie that appeals to Alabama consumers. “If we negotiate that here, we get a much better deal,” Sparks explained.

“We communicate. That’s the real key,” he added.

Extending that collaborative approach is a mock store in the company’s DDC, or Design Development Center, where merchants, store operations managers and even vendors can meet to view actual mock-ups of new planograms and merchandising ideas.

Under Dollar General’s current management structure, two operations executives at the SVP level report to Sparks. Those SVP operations leaders oversee the activities of seven divisional VPs, each of whom is responsible for as many as 1,800 stores. Reporting to the divisional VPs are 69 regional store directors, each in charge of 10 to 12 districts. Each district manager within those districts oversees a dozen or more Dollar General stores.

Despite the clear command structure, decision-making at store level is a collaborative process and dialogue is encouraged. “On many of our store visits, our operators and merchants visit at the same time,” said Sparks. “We all compare notes when we look at opportunities.”

In addition, executives in operations, merchandising, supply chain management and other disciplines assemble on most Mondays for lengthy meetings to coordinate merchandising/ marketing strategy and store-level execution.

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Making every item contribute

BY Jim Frederick

Larry Gatta, general merchandise manager, Dollar General

Dollar General employs sophisticated data analytics to gauge item movement, consumer demand and customer segmentation store by store. But beyond that, said Larry Gatta, general merchandise manager, “we go through a category review of every planogram” in the store on an annual basis.

(Click here  to download the full special report.)

That process is not unique to Dollar General since the company’s overhaul began in 2008, but it has been enhanced with improved analytics and oversight, said Gatta. Thus, when updating a planogram or product set, “we go through … a strategy meeting first, followed by a business review, and then a final walk-through with the executives.”

Merchandising the store, planogram by planogram, is “a very collaborative process,” incorporating input in the planning meeting from “all functional groups,” said Gatta, including decision-makers across a broad spectrum of merchandising, supply chain and operational disciplines. “This meeting … incorporates all functional groups,” he said. “It’s shared accountability, so you have pricing, supply chain, a shrink team, a private-label team — every cross-functional team plays a role.”

The team also incorporates Nielsen data “within our customer segmentation,” as well as “clustering opportunities” for individual items and categories based on regional consumer preferences. For instance, “you have some brands that resonate strongly on the West Coast, but not so much on the East Coast,” Gatta explained.

“Everything is based on … the value proposition,” he added. “And in a limited-SKU environment, we get very ‘granular.’ So every SKU has to work hard for us, and we get to a micro level. We look at the trend data and build a forecast on every single SKU. So if those SKUs aren’t performing, the opportunity exists … [for] some mid-course corrections in between the [planogram] resets.”

Based on this analytical, data-driven approach and close scrutiny of customer preferences and product movement, “we change out probably 20% of our mix every year” through planogram resets and “mid-course corrections” of both individual items and categories, said Dollar General’s GMM. That means that product categories can go up or down in linear shelf footage based on their closely tracked performance throughout the year. And given Dollar General’s adherence to its core value proposition, “We continue to leverage our $1 price point, … which still accounts for well over 20% of our overall mix.”

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Delivering value as a prime focus

BY Jim Frederick

Dave D’Arezzo, EVP and chief merchandising officer, Dollar General

Most of the products and brands sold in a Dollar General store can be found in any number of competing drug, supermarket, club and mass merchandise stores. So what draws millions of loyal customers back to its more than 11,500 locations every day?

It’s the knowledge that they’ll find the basic household and personal necessities they need at prices they can afford, day in and day out, said Dollar General’s top merchant. And with the company’s core customer base drawn from households earning less than $50,000 a year — in many cases much less — the ability to provide name brands and quality private-label brands at affordable prices is critical to the success of both Dollar General and its vendors.

(Click here  to download the full special report.)

“Our key mission,” said Dave D’Arezzo, EVP and chief merchandising officer, “is delivering value every day to our customers.”

That means that both Dollar General and its suppliers “have got to be committed to cost,” he declared. “We have 30 million people coming through our stores every week, and we see ourselves as their buying agent.”

“We’re out there trying to deliver affordable products,” added D’Arezzo, who joined the retailer in November 2013 to head all merchandising and marketing activities after serving in senior management roles at Grocers Supply Co., Duane Reade, Raley’s and Wegmans Food Markets. “So if you’re a supplier, you’ve got to be committed to finding ways to deliver affordable products to us that we can carry every day, year-round. We want to build the businesses that deliver … everyday value to our customers.”

Dollar General’s merchandising team now expects three critical capabilities from its vendors, added general merchandise manager Larry Gatta. Besides the ability to deliver “affordable pricing,” he said, vendors “have got to know our customers and customer segmentations, and exactly how they live on a daily basis.”

Thirdly, vendors have to know “what creates the opportunity for segment growth,” said the GMM. “We’re not in an environment where we carry three brands of cake mix. We have one branded yellow cake mix. So we’re looking for new segment opportunities, for innovation that grows segments. We’ve got to concentrate on who our customer is.”

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