GOODLETTSVILLE, Tenn. -- With a new-format test, discount retailer Dollar General is placing a greater emphasis on consumable products and other items that “meet the needs of our urban customers,” CEO Todd J. Vasos said during the company's fourth-quarter earnings call.
"We have been conducting a 'test and learn' for our smaller-format store that allows us to capture growth opportunities in more densely populated metropolitan areas," he said. "Currently, we have opened approximately 30 stores with selling space of less than 6,000 square feet."
As reported in a McLane/CSP Daily News Flash, these stores are approximately 20% smaller than Dollar General's traditional stores, which are typically about 7,400 square feet.
How many of these stores does Dollar General plan to open?
Vasos said the company anticipates opening 900 new stores in all, including about 80 of the smaller-format stores, and relocating or remodeling an additional 875 locations in fiscal 2016.
"Sales productivity and returns based on the early results are very encouraging," he said of the smaller stores. "By eliminating less-productive product segments and adding or expanding product departments to meet the needs of our urban customers, we believe this smaller-format store will allow us to have higher capture rate per site selection."
While he did not specify all of the merchandise to be eliminated, he did acknowledge that apparel could be on the list.
"With our robust category management system … we'll continue to monitor all categories. And if we feel we need to contract at times and expand in other areas, we'll definitely do so," he said.
And without naming the categories, Vasos hinted at competition with the convenience-store channel. "Depending on the area that we put these stores, the consumable mix does increase a little bit," he said.
Dollar General executives believe the smaller format can also work in rural areas with lower household counts.
"It's going to be a nice balance because what we want to do is really look at how it works," Vasos said. "Of the 30 [pilot sites] that we have opened, I can tell you that we've got a few open in the rural markets and we've got the majority of them right now open in the metro markets. And so that balance is probably going to still be heavily weighted right now to metro, but as we go forward, we're seeing some real opportunities in the rural markets with those lower households."
In September 2015, Vasos teased a new Dollar General prototype that would offer "a more customer-friendly shopping experience [where] the consumer will be able to and have faster, more convenient checkout." He did not specify the prototype's square footage but said that it would "be rolled out in 2016 for all new stores, relocations and remodels."
Goodlettsville, Tenn.-based Dollar General operates 12,483 stores in 43 states as of Jan. 29, 2016.
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