Retailer Profile
Family Dollar Stores in USA
Table of Contents
Retailer Overview 3
In A Page 3
Store Formats 3
Structure & Key Contacts 4
Contact Details 6
Strategy 7
Strategic View 7
SWOT 8
Marketing 9
Private Label 9
Buying 10
Sustainability 11
Shopper Insights 11
Category Insights 12
Financial Review 13
Financial Analysis 13
E-Commerce 22
E-Commerce Strategy 22
IT & Supply Chain 23
IT 23
Supply Chain 25
News & Insights 27
Developments 27
Family Dollar (Discount variety stores) - Retailer Overview 46
Store Concepts 46
Structure & Key Contacts 47
Strategy 48
Private Label 48
Retailer Overview
In A Page
Total Banner Sales 2012
Global - USD 9.8 billion
United States Sales 2012
Total Sales - USD 9.8 billion
Sales CAGR 2007-2012
Global Sales - 6.43%
United States Total Sales - 6.43%
Number of Outlets 2012
Global - 7,442
United States - 7,442
Chairman & CEO
Mr Howard R Levine
Website
www.familydollar.com
Summary
Family Dollar is one of the fastest growing discount store chains in the United States. The merchandising strategy that drives this growth provides customers with good values on basic merchandise for the family and home in a small-box, neighbourhood format.
Store Formats
Expansion Strategy
Family Dollar has a near-national presence. The retailer plans net new store growth of 5%-7% in FY 2013, which was achieved in FY 2012, Much of its growth will focus on the west coast as the retailer opened its first stores in California in early FY 2012 (late CY 2011) with plans for as many as 1,000 stores in the state. Additional new markets in fiscal 2013 include Oregon, Washington and Montana. A planned distribution centre under construction in Utah (estimated opening date of summer 2013) will support future west coast expansion. Family Dollar also is growing its Midwest presence supported by a new DC that opened in Indiana in June 2012.
As of 29 September 2012, Family Dollar's top five states in terms of store count included: Texas, Florida, Ohio, North Carolina and Michigan.
Family Dollar site criteria and building requirements:
- Approximately 7,000-10,000 square feet (650-929 sq. metres) including sales area and stockroom
- Adequate parking for 25 or more cars
- Conveniently located to value oriented, low to middle income customers
- Food store anchored neighborhood shopping centers, convenience strip centers, freestanding buildings, or storefront locations
Structure & Key Contacts
Ownership
Family Dollar, one of the fastest growing discounters in the USA, is a public company listed on the New York Stock Exchange.
Family Dollar named Trian Partners co-Founder, Edward P Garden, to its executive board in September 2011 as part of an arrangement to limit the investment company’s share of the discount retailer. The agreement means that Trian will not be able to increase its stake in Family Dollar above 9.9% from its current 8.29%. It came seven months after Trian’s offer to acquire the retailer for USD7.75 billion was refused as it was thought not to be in Family Dollar’s best interests.
Management
Mr Howard R Levine
Chairman & CEO -
Mr Michael Bloom
President & COO -
Mr Barry W Sullivan
Operations Director - EVP Store Operations
Mr Charles S Gibson, Jr.
Director Supply Chain Management - EVP Supply Chain
Mr Joshua R Jewett
Chief Information Officer - SVP
Mr Kevin Boyanowski
Senior Vice President Procurement - - Global Sourcing
Mr Jocelyn Wong
Marketing Director - Chief Marketing Officer
Mr Paul White
Merchandising Director - EVP & Chief Merchandising Officer
Ms Mary Winston
Chief Financial Officer - & EVP
Mr Thomas M Nash
Property Director - Senior Vice President - New Stores
Contact Details
Country Head Office Address
Family Dollar Stores, Inc.
P.O. Box 1017
Charlotte, North Carolina
28201-1017
United States
Tel: (704) 847-6961
Web: www.familydollar.com
Family Dollar
Discount variety stores
Family Dollar Stores, Inc.
P.O. Box 1017
Charlotte, North Carolina
28201-1017
Tel: (704) 847-6961
Web: www.familydollar.com
Strategy
Strategic View
2013 Strategy
Family Dollar will continue its accelerated new store growth strategy with a target of 5-7% net new store growth a year. In 2013, Family Dollar plans to open 500 new stores – following the 475 opened in 2012 – and renovate, relocate, or expand 850 stores (the same as was done in 2012). Family Dollar anticipates that within the next couple years, the entire chain of stores will have been refreshed. Family Dollar entered the California market in fiscal 2012, opening a total of 41 stores in the state. Long-term plans call for as many as 1,000 stores in California. Additional new markets in fiscal 2013 include: Oregon, Washington and Montana.
The retailer’s 11th distribution centre is under construction in St George, Utah, which will support West Coast expansion and is expected to open in the summer. The facility will generate approximately 450 full-time jobs. Construction of the 800,000 square foot (73,000 square metre) depot started summer 2012 following the opening its 10th distribution centre in Ashley, Indiana. In total, Family Dollar's 2013 CapEx budget is USD600-650 million, staying relatively flat from USD603 million spent in 2012.
Enhancing and expanding the consumables offer remains a focus for Family Dollar in fiscal 2013, propelled forward by the September partnership launched with buying group McLane. The exclusive six year partnership will allow Family Dollar to offer a more consistent assortment of products across the chain. The retailer will look to continue growing its SKU count succeeding the momentum gained in fiscal 2012 as it focuses on offering an improved merchandise assortment that is more competitive and relevant to its customers. Family Dollar’s consumables sales rose by more than 13% to 69% of total sales in FY 2012 and the retailer expects the trend to endure in FY 2013.
While the consumables, seasonal and electronics categories grew in FY 2012, the home, apparel and accessories categories fell. As a result, Family Dollar will focus on driving profitability and improving inventory productivity in the ailing departments. Family Dollar will also look to further increase its private label penetration with a focus on consumables. The retailer expects to launch new brands as well as refresh existing brands.
Further focus will be on driving customer loyalty by improving store level processes, efficiency and productivity as well as improve its in-stocks. Global sourcing will be an additional focus as Family Dollar further integrates its new international offices in Hong Kong and Shenzhen and looks to open an office in Shanghai, China. The retailer doubled its direct-to factory purchases in fiscal 2012 and plans to bring that purchase type from 4% in 2012 to 13% in 2015.
Planet Retail View
· Family Dollar is a growth story. Sales are up. It is posting solid same store sales growth. It is accelerating new store growth. It is growing both national brands and private label programs. Consumables merchandise is becoming a bigger portion of the retailer's overall sales mix. The company plans to increase its penetration of middle-income shoppers. Planet Retail is upbeat about the retailer's future prospects.
· Plenty of store expansion opportunities remain, especially on the west coast. However, Family Dollar will face intense and growing competition from a host of other retailers and formats, including other growth-minded value channel retailers (i.e., Dollar General, Dollar Tree, Aldi); Walmart; and drugstores that are working furiously to fill in urban gaps.
· Family Dollar is working hard to improve shopability of stores. It has invested to overhaul existing stores through a massive store remodeling program, which is nearly complete. Family Dollar has reported that it not only is attracting more shoppers into its stores, but also on a more frequent basis and getting them to spend more. All trends that bode well for future performance.
· The retailer is enhancing and expanding its brand presence - both bolstering national brand representation and private label penetration. The proportion of sales coming from food and grocery continues to increase. The key watch out here: Family Dollar must figure out how to protect margins since much of its growth is coming from low-margin consumables. It has the opportunity to enhance treasure hunt-type merchandise offer, especially as the US economy improves and shoppers begin spending more on general merchandise, including apparel and home items.
Key Initiatives
· Maintain new store expansion (500 new store growth) with a focus on the California market
· Roll out more "consumer-centric" stores (both new stores and existing store remodels) to conform with uniform design and layout, and offer shoppers an improved shopping experience
· Continue expansion of consumables assortment, adding more food and basic household items, i.e., health & beauty, pet, etc.
· Increase private label penetration, especially consumables, and intro new ranges
· Expand global sourcing activities with a focus on direct-to-factory purchases (from 4% in 2012 to 10% in 2015)
· Drive profitability of the ailing home, apparel and accessories categories
SWOT
Strengths
Small-box convenience/value proposition
“Right” strategy in place: store locations; merchandising; move toward standardized and centralized execution
Attracts core base of financially strapped consumers yet moving toward broader shopper appeal
Growing emphasis on consumables merchandise, including food, health & beauty, pet, and other basic household essentials
Balanced brand strategy: More national brands; Strong private brands to support value statement
Investments in infrastructure/systems positions for growth and productivity gains
Weaknesses
Cash position not as strong as other leading value retailers; but increases in operating margin is a good sign
Lost ground to key competitors in terms of store expansion to instead invest/focus on internal issues in recent years
Out-of-stock issues remain a concern
Heightening gross margin pressure with mix shift toward low-margin consumables
Core shoppers = lowest-income shoppers; limits ability to increase basket size in down economy
Lags other value channel leaders in e-commerce/ multi-channel retailing
Opportunities
Plenty of expansion runway remains, especially west of Rockies
Upside potential to increase comp-store sales, particularly via ongoing store remodeling program
Improve in-stock position and inventory management to increase sales and comps
Extend reach and appeal to attract more shopper niches and shopper segments (i.e., ethnics/Hispanics)
Foresight to incorporate shopper insights (ShopperGauge Learning Labs) into planning process could lead to better in-store experience for shoppers
Some new blood in top ranks could “change things up”
Threats
Increasing geographic/competitive overlap with Walmart, others (i.e., drugstores) in food space
Intense competition, especially price competition for basic household items, as Walmart recommits to EDLP and other grocers increase price investments
Rising costs (commodities, fuel, labor) pressure margins and business model in terms of ongoing ability to deliver low-price promise
Potential for shopper trade-up to other retailers and channels with improving economic conditions
Big-box retailers developing/testing small-box formats
Land rush in under- and un-penetrated geographies (i.e., West Coast) to acquire “best” real estate
Marketing
Marketing Strategy
The company’s “everyday low price” strategy relies on offering consistently low prices on its products and utilising limited advertising and promotional activity. In recent years, however, Family Dollar has increased its advertising and marketing efforts. Advertising costs, net of co-op recoveries from vendors, totalled USD19.6 million, USD17.1 million and USD12.4 million in fiscal 2012, 2011 and 2010, respectively.
The company traditionally advertises through circulars available in stores or, occasionally, circulars that are inserted in newspapers or mailed directly to consumers’ residences (one-two per year). Going forward, the company intends to drive greater awareness of private brands through increased marketing and visual merchandising support.
Family Dollar also is adding more product information and educational content to its website (e.g., how-to videos, recipes, etc.). Family Dollar lags other value chains (e.g., Dollar General and Dollar Tree) in its use of social/mobile media, but it is making progress. A recent Facebook promotion encouraged shoppers to “like” Family Dollar on Facebook and receive a USD5 coupon in return. Shoppers can opt to receive mobile alerts of special offers from Family Dollar.
Family Dollar selected Marketing Management Inc (MMI) for help in private brand sourcing, product development, category analytics, assortment strategy, quality assurance and customer insights in 2011. The company also chose Bernstein-Rein Advertising of Kansas City, MO, as its first agency of record in 2010. Billings were not disclosed. Bernstein-Rein, which is a former creative agency for Walmart, handles tasks for Family Dollar like creative, media planning and buying, and digital work.
Pricing Strategy
Family Dollar calls its pricing strategy EDVP - every day value pricing. It primarily operates an EDLP strategy with fixed price points - most items sell for below the USD10 price point - but also augments with promotional deals to drive home the value message.
Private Label
Private Label Strategy
Family Dollar features national brands, but also mid-tiers and private brands to provide credible trade-down options to shoppers. The retailer offered 1,000 private label SKUs in 2012, up from 600 in fiscal 2010. It anticipates doubling private label SKU count by fiscal year 2015 to 2,000 and has set the goal of introducing 500 new private label consumables SKUs in fiscal 2013. Family Dollar expects to launch new brands in 2013 while also refreshing some of its existing brands. The retailer intends to drive greater private label awareness through increased marketing and visual merchandising support.
During fiscal 2012, nationally advertised brand name merchandise accounted for approximately 56% of sales. Merchandise sold under Family Dollar's private label programme, across all merchandise categories, accounted for approximately 25% of sales, increasing 9% over fiscal 2011. Private label consumables sales performed the best, increasing by 16% over fiscal 2011, and represented approximately 17% of total consumable sales. Merchandise sold under other labels, or which was unlabeled, accounted for the balance of sales. During fiscal 2012, closeout merchandise accounted for approximately 1% of sales.