NRF Show Report: Dollar General Gets Sophisticated

Dollar General recently completed the first stages of a major overhaul of its merchandise planning process that allows the chain to take a more sophisticated approach, said Dana Lee, director of merchandise planning. The change was necessitated by Dollar General's explosive growth, Lee explained during his presentation at the NRF's annual Big Show. Dollar General's store count increased 82% between 1998 and 2003, from 3,687 to 6,700 stores, but merchandising tactics remained too broad for the new complexities of scale, Lee said. As an example, he cited the pet food category. "We had a pet department that, at the time, had only one classification," Lee said. The chain decided to revise and refine its strategy to capture more information. As a first step, it reconfigured the overall merchandise hierarchy in 2001, hiring four planners to oversee each of the primary divisions -- basic household, highly consumable, basic clothing, and seasonal -- which are further subdivided into 23 departments and 600 classifications. The new system gave Dollar General the ability to scrutinize data more closely and discover hidden sales patterns (using software from JDA Software Group, Scottsdale, AZ). Dollar General used that data to create store clusters based on similarly selling SKUs, then combined that information with other common attributes such as size, volume and seasonality to assign all stores to one of 438 "channel groups." The chain now plans merchandising decisions to fit the profile of each channel group. In the future, Lee said, Dollar General will use the information to create cluster-specific planograms. Currently, all stores carry the same core 3,700 SKUs, which account for approximately 70% of the total inventory.

NRF Show Report: Dollar General Gets Sophisticated

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