Business Case Analysis Instructions and question in pdf ‘Everything Going the Wrong Way’: Dollar Stores Hit a Pandemic Downturn Their business model is bei

Business Case Analysis Instructions and question in pdf ‘Everything Going the Wrong Way’: Dollar Stores Hit a Pandemic Downturn
Their business model is bei

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‘Everything Going the Wrong Way’: Dollar Stores Hit a Pandemic Downturn
Their business model is being tested by worker burnout, pressure to raise wages, supply chain
problems and growing local opposition.

The New York Times
By Michael Corkery Sept. 30, 2021
Sandra Beading was fed up with the 70-hour workweeks, the delivery trucks running days behind
schedule, and the wear and tear on her knees from all the stooping to restock the bottom shelves.
The manager of the Dollar General store in Wells, Maine, Ms. Beadling, 54, had tried to hire more
help. But that was a tough sell when Walmart was offering $16 an hour and her store was paying
$12.
Ms. Beading had spent long stretches this summer as one of only a few workers in the store,
tending to the register and trying to help shoppers.
She had pleaded with her managers to allow the store’s part-time workers to have more hours, but
to no avail.
One night last month, Ms. Beading closed up the Dollar General at 10, got home at 11:30 and then
left her house at 4 a.m. to be back at the store
for an inventory check. “I was so tired I couldn’t find words,” she said. She sent her assistant
manager a text saying she had quit and then blocked her co-workers’ numbers so they couldn’t call
back and persuade her to stay.
“It wasn’t sustainable,” Ms. Beadling said.
Some wonder whether the same can be said for the unbridled success of dollar stores and their
business model, which has benefited from the
prevalence of poverty and disinvestment in the inner cities and rural America. Dollar stores, which
pay among the lowest wages in the retail
industry and often operate in areas where there is little competition, are stumbling in the later
stages of the pandemic.
Sales are slowing and some measures of profit are shrinking as the industry struggles with a
confluence of challenges. They include burned-out workers, pressure to increase wages, supply
chain problems and a growing number of cities and towns that are rejecting new dollar stores
because, they say, the business model harms their communities.

Just this week, Dollar Tree, which also operates Family Dollar stores, said it would start selling more
products above $1. The move has broad
significance beyond the discount retail industry, analysts say, because it signals that a company
that has built its brand on selling $1 merchandise feels the need to shift its model to account for
higher wages and an unreliable supply line from Asia.

“It means these issues may be permanent,” said Scott Mushkin, a founder and an analyst at R5
Capital, a research and consulting firm focused on retail.
The troubles follow a year of soaring profts and a period of staggering growth in the industry.
Roughly one in every three stores that have been announced to open in the United States this year
is a dollar store, according to Coresight Research, a retail advisory firm, a sign of how well the
industry did in 2020.
The business model, which relies on relatively cheap labor and inexpensive goods, is designed to
flourish even when its core customers are hurting financially. The strategy was honed during the
high unemployment and wage stagnation of the Great Recession of 2008.
But dollar stores are not as well equipped for the surreal economy of today, when workers like Ms.
Beading are quitting in protest and a single
coronavirus case on a container ship can cause a two-month delay in getting Chinese-made
merchandise to the United States.
“This is another case of the pandemic laying bare the underlying vulnerabilities in how we’ve set up
our economy; said Stacy Mitchell, co-director of the Institute for Local Self-Reliance, an advocacy
group that is critical of many large corporate retailers.
While just about every retailer is dealing with shipping and distribution problems, the dollar stores
may have difficulty passing on the increased costs to price-sensitive customers.
Dollar Tree sald it expected as much as $200 million in additional freight costs this year.
In an August conference call with analysts, Dollar Tree’s chief executive, Michael Witynski,
recounted how one of the shipping vessels the company had chartered was denied entry to a
Chinese port after a crew member tested positive for the virus. The ship had to change crews in
Indonesia before returning to China.
Mr. Mushkin said of Dollar Tree: “They have everything going the wrong way.
Dollar General said it had hired 50.000 additional workers between mid-July and Labor Day, but
acknowledged in August that its labor costs were adding to expenses. Analysts say some of these
additional expenses are driven by the pressure to raise wages.
Still, the higher pay may not be enough to encourage employees to stay on the job. Workers say the
stores are chronically understaffed and rely on part-time workers who are given unpredictable
schedules and cannot afford the required employee contribution for health care benefits.
In a statement. Dollar General said, “We pay competitive wages, which are determined based on
several factors including the relevant labor
market.” The company added that *our operating standards are designed to provide stores with
sufficient labor hours, and it is not our expectation that store managers should work 70 to 80 hours
per week*
Part-time workers sometimes encounter the opposite problem of not having enough work. As a
store manager, Ms. Beading said, she was
constantly trying to find additional hours to give to her employees who needed the money, including

one worker who was living in a tent because she couldn’t afford rent.
But the allotted hours for the store were limited ov hisher-uo manasers, she said.

This summer, social media buzzed with photos of dollar stores, from Lincoln, Neb., to Pittsburgh
and beyond, where employees had taped up signs in the front door announcing that they had
walked off the job.
*Capitalism will destroy this country, read one sign in the window of a Dollar General in Eliot, Maine,
this spring. “If you don’t pay people enough to live their lives, why should they slave away for you?’
Paige Murdock, a manager of the Eliot store, was the first to quit. The company limited the hours
she could give to her staff, she said, which often meant she was running the store short-handed.
She went weeks without getting a day off or seeing her family but, as a salaried employee, did not
receive overtime pay. When a manager said Ms. Murdock, 44, couldn’t take her previously approved
vacation week to help her daughter, who is in the military, move to Texas, she decided to quit.
“If you look at my résumé, I am a very loyal employee” Ms. Murdock said. “I will work my heart out.
All the other jobs I left I would give two weeks’ notice. I don’t call out. I don’t ask for much.”
Ms. Murdock now works in a warehouse for a coffee company and picks up delivery jobs at
DoorDash to fill in the gaps.
In its statement, Dollar General said its manager turnover “has been at historically low levels over
the past few years.
Chris Burton started working at a Dollar General in New Orleans in the spring of 2020, earning $10
an hour. A saxophonist, he took the job
because his work as a substitute teacher and his musical performances had been put on hold
during the pandemic. More than a year later, his
hourly pay has nudged up only to $11.
“Walmart will move you up to $15 much faster” said Mr. Burton, 34, who works with Step Up
Louisiana, a labor advocacy group that has been pushing for improved working conditions in dollar
stores. “But Dollar General is never going to pay as much as Walmart. That’s how they keep their
prices tower. It’s basic economics:
Wall Street is also taking note of the low pay and the complaints from employees about working
conditions.
“We regularly see shelves that are stocked in a disorganized manner,” said Brad Thomas, an analyst
at KeyBanc Capital Markets. *As a retail analyst that indicates that the store doesn’t have enough
labor or the right labor”
Mr. Mushkin of RS Capital said other major retailers had responded faster to the changing labor
conditions by raising wages when their sales were booming last year. Those early moves resulted in
a smaller hit to their bottom line than what the dollar stores are experiencing.
“We provide our associates with flexible schedules and market-competitive pay, and in all cases, we
are at or above minimum wage in the markets we operate in” Dollar Tree said in a statement.

Political attitudes toward dollar stores in some communities are also shifting. Since the start of the
pandemic, nearly three dozen communities have passed limits on dollar store developments or
rejected stores outright, according to the Institute for Local Self-Reliance.

The dollar stores say those are the exceptions. “We are always disappointed when local lawmakers
choose to limit our ability to serve their unity, but these relatively few situations have not materially
impaired our ability to grow.” Dollar General said.
The company added, “We provide our customers with convenient access to essential items and
quality brands they want and need, including components of a nutritious meal,” including fresh
produce, which is being offered in an increasing number of stores.
Although the opposition hardly makes a dent in the more than 1,620 dollar stores slated to open this
year, some measures have happened in major markets such as the Atlanta area and Cleveland, and
in small towns like Warrensburg, N.Y. has been considerable opposition on Warrensburg’s governing
board to a Dollar General that was proposed to be built on Main Street.
Bryan Rounds, a member of the board, said Warrensburg, in the southern Adirondacks, had long
been mostly a “drive-through town” on the road to lakeside camps or ski slopes farther north. But
during the pandemic, Warrensburg, like many rural areas, became a popular spot for Airbnb rentals.
“Things are happening around here,” Mr. Rounds said. “We don’t need one of these stores.”

Shoppers flooded dollar stores to stockpile cheap goods during the pandemic
here’s why that’s been a major boon to Dollar General

• Dollar stores have historically seen great success during times of economic uncertainty and high
unemployment.
• And the coronavirus pandemic appears to have offered major dollar store chains such an
opportunity.
• Dollar General and Dollar Tree hosted earnings calls on Thursday. Dollar General posted
triumphant numbers, while Dollar Tree saw a dip
thanks to dampened Easter sales.
• However, analytics indicate that both dollar stores businesses remain poised to continue winning
over consumers looking to pinch pennies in an uncertain economy.
The coronavirus pandemic has proved to be a nightmare for many retailers, but the dollar store
business appears to have remained as sound as a dollar despite the tough times.
Dollar General and Dollar Tree each reported earnings this week. Dollar General, the Goodlettsville,
Tennessee-based business, reported a same-store sales spike of 21.7%, eclipsing gains by even
larger retailers like Walmart and Target. The Dollar Tree, which operates both its namesake stores
and Family Dollar locations, saw shares jump after the retailer beat expectations, according to
Marketwatch.

Given that dollar stores tend to thrive in uncertain economic times, the coronavirus pandemic has
proved to be a major opportunity for both Dollar General and Dollar Tree. While Dollar General has
seen more success in terms of its sales and store visits so far, the dollar store industry as a whole
will likely see a boost from an increasingly dire economy.
‘We will be in a great position’
Dollar General and Dollar Tree are currently the two largest dollar store chains in the United States.
On Thursday, the two businesses posted
earnings, with Dollar General coming across as the dominant retailer based on sales.
In a note regarding Dollar General’s earnings, managing director of GlobalData Retail Neil Saunders
wrote that the chain has succeeded by opening
locations in “rural or suburban areas which are underserved by other operators.” Saunders credited
that strategy with positioning the company to
post a 21.7% jump in same-store sales and a net sales increase of 27.6%.
“We continue to believe we operate in one of the most attractive sectors in retail and have an
established and even stronger bond with existing
customers during these unprecedented times.” Dollar General CEO Todd Vasos told analysts during
the earnings call. “Combined with the actions we’ve taken to forge new customer relationships, we
believe we are well-positioned to drive continued growth even what’s expected to be a challenging
economic environment.”

In comparison to its rival Dollar General, Dollar Tree seemed to wilt during the first quarter. The
company’s enterprise president Mike Witynski said in a statement that while Family Dollar
“delivered strong same-store sales with a 15.5% increase,” Dollar Tree itself saw sales plummet due
to “lower Easter holiday sales” of candy and other discretionary items.
But it’s not all bad news for Dollar Tree and Family Dollar. Marketwatch reported that the retailer
beat expectations, and saw sales rise to $6.29billion, up from last year’s $5.81 billion in sales.
During a Thursday call with analysts, Dollar Tree CFO Kevin Wampler told Goldman Sachs analyst
Chandni Luthra that the company was expecting a post-Easter rebound, thanks in part to the
stimulus checks distributed to consumers across the United States.
“We can see a correlation of the stimulus dollars being released and an increase in our basket size,”
he said.
In response to a question from Piper Sandler analyst Peter Keith, Witynski also said that he was
confident that his stores will remain a go-to spot for value-conscious shoppers, especially with
unemployment spiking.
“We will be in a great position as a value retailer” he said. “When people are unemployed and they
don’t have that source of income, they will need value more than ever. And we should be in a great
position to provide that for them.”
“Thrive during the crisis’

Barrons reported that the coronavirus offers a “slam dunk for dollar stores” due to economic strife,
rising unemployment, and a consumer base focused on stretching their paychecks, all factors that
have historically benefitted the dollar store segment of retail.
With recession fears swirling and the 10-week total of US jobless claims hovering around 40 million,
the coronavirus pandemic has brought about an environment perfect for increased dollar store
traffic.
“Consumer sentiment data analysis shows that when consumers are more value-conscious, dollar
stores are the big winners.,” Christopher
McGovern, a retail services senior consultant from market research firm Numerator @, told Business
Insider. “With record job losses, dollar stores are well positioned for the coming months – and, given
job losses are expected to continue, retailers have an opportunity to solidify their
relationship with these new shoppers as they return to dollar stores for repeat visits.”
However, 2020 had started out as a promising year for Dollar General, even before the full brunt of
the coronavirus pandemic was felt in the United States. A March 13 report from Numerator found
that dollar stores enjoyed significant “organic growth.”
“Dollar stores were already out-performing many other retail channels with the start of 2020 and
the strong economy,” McGovern told Business Insider.
During February, Dollar General saw a 14.8% spike in-store visits, according to analytics company
Placer.ai. Before the COVID-19 pandemic hit, Placer.ai also reported that Dollar Tree saw store visits
jump 7.7% and 11.9% in January and February.

But Dollar General and Dollar Tree fared quite differently once different localities began issuing
stay-at-home and social distancing orders to
combat the coronavirus.
Placer.a found that store visits to Dollar General jumped 31.4% in March and 19.2% in April. The
virus had the opposite effect on Dollar Tree store visits, which saw a decline of 7.8% and 31% year-
over-year in March and April.
Placer.a found that between May 4 and May 10, Dollar General visits picked up 30.4% above the
store’s weekly baseline between January 2019
and May 2020.
Placer.ai VP of Marketing Ethan Chernofsky concluded that the chain “has managed to thrive during
the crisis while being uniquely well-positioned for the economic environment inevitably to come.”
He also noted that Dollar Tree “is seeing traffic surge back to ‘normal’ levels with visits the week of
May 4th rising 21.1% above the baseline.”
McGovern said that dollar stores like Dollar General and Dollar Tree have increasingly “attracted a
younger, more diverse consumer base” that is “not just low income – middle and higher income
groups are electing to shop at dollar stores.” And these value-focused shoppers are ramping up
their spending.

“What distinguishes dollar stores is they have the strongest spend per trip growth versus year ago,
so people aren’t just dropping in, they are
shopping there more,” McGovern said. “Dollar stores also have stronger trips per household than
many channels.”
Refinitiv’s earnings predictions for the week of May 24 to June 5 estimated that same-store sales at
the Dollar Tree would increase 3.5%, while same-store sales at Dollar General would spike 10.7%.
“We have seen an increase in customers and no surprise, right?” Vasos told analysts on Thursday.
“When the going gets tough, we know that our customers need us more.”

CVS is closing 900 stores, and the big winner is Dollar General

New York (CNN Business) CVS is heading in the wrong direction: Traditional pharmacies are on the
decline, and America’s largest drug store chain plans to close about one in 10 of its outdated
locations. One company is particularly primed to take advantage – and it’s not Walgreens or Rite
Aid.
Dollar General (DG) has rapidly expanded in the United States over the past decade, in large part by
undercutting independent and chain drug stores and snatching away some of their shoppers. The
discount giant is particularly well-positioned to capitalize on CVS’ planned closings.
CVS’ announcement comes at a timely moment for Dollar General – exactly as Dollar General tries to
“establish itself as a health destination.”
Dollar General is launching a health care initiative for the first time, offering customers in what the
company calls “health care deserts” in rural America a variety of health services in stores and
expanded over-the-counter products. The company sees this market as a major growth area.
Thursday’s “news from CVS has the potential to accelerate that opportunity,” Chuck Grom, a retail
analyst at Gordon Haskett Research Advisors, said a note to clients Thursday. CVS’ planned
closings are a “positive” for Dollar General, he added.
Pharmacies on the decline
CVS pointed to changes in “population, consumer buying patterns and future health needs” for its
decision to close stores.
The closings mark the latest contraction of US drug stores in recent years. The sector has been
under pressure from shoppers increasingly shifting spending online, as well as to big-box chains,
warehouse clubs and dollar stores. Declining reimbursement rates for prescription drugs have also
squeezed drug stores profits.
Nationally, the number of pharmacies has dropped from 62,098 in 2015 to 56,788 in 2019,
estimated the National Association of Chain Drug Stores, an advocacy group. This includes chain
and independent drug stores, as well as pharmacies in grocery stores and big box stores.
Drug stores have been bleeding market share to Dollar General. The company and analysts sav its
prices are tvoicallv around 40% lower than

Health care at Dollar General
Dollar General has run into opposition from local leaders in many areas of the country who argue
that it drives out independent grocery stores and pharmacies and does not sell fresh food at stores
– contributing to the health care problem it now says it wants to help solve.
The company in recent years has started to some produce and fresh fruit at stores. Now, Dollar
General says adding health care is a way to fill a gap in the market, get customers to spend more
when they visit stores and attract new shoppers.

Dollar stores are starting to offer fresh food after years of criticism
In July, Dollar General announced it hired its first chief medical officer to help develop its health
care services and product offerings at stores.
Dollar General also said it planned to increase its store selection of cough and cold, dental,
nutritional, health aids and feminine hygiene products.
That’s a bonus for Dollar General because these items carry higher profit margins than most of what
it currently offers: mainly packaged foods,
perishables, paper and cleaning products, and personal care items.
Around 65% of Dollar General’s stores – more than 10,000 locations – are in health and medical
“deserts,” where people have to drive 30 or 40 minutes to get basic services, CEO Todd Vasos said
in September.
Health care “could be a really big deal” for Dollar General, said Vasos, who is a former drug store
chain executive.
Dollar General will not put pharmacies in its stores, he said, but it’s exploring options such as
offering eye exams, telemedicine and prescription
drug pickups.
He even suggested Dollar General might benefit from partnering with independent pharmacies on
its health push.

Nearly 1 in 3 new stores opening in the US is a Dollar General
Three dollar store chains will make up almost half of all the new stores opening up in the United
States this year, a reflection of the dollar store sector’s outsized growth in the retail industry as
other chains close shops or stop building new ones.
About 45% of the 3,597 store openings that large retail chains in the United States have announced
so far this year are from Dollar General, Dollar Tree and Family Dollar, according to the latest figures
from Coresight Research, a firm that aggregates the numbers from company filings and press
releases.
These openings are a continuation of dollar stores’ rapid growth even before the pandemic.
Economists and retail analysts say dollar stores are expanding in part because of growing wealth

inequality in the United States and the hollowing out of the middle class. The share of American
adults who live in middle-income households decreased from 61% in 1971 to 51% in 2019, according
to Pew Research Center.

“We’ve seen a bifurcation in the economy” said Ken Fenyo, the president and head of advisory and
research at Coresight. “So while the wealthy have done well and continue to do well since the Great
Recession, there’s certainly a lot of the population that has not done as well. The dollar stores
appeal strongly to that segment of the population. That’s probably the overriding reason we see for
the growth in the format.”
While Dollar Tree targets a broad range of income groups, Dollar General and Family Dollar mainly
cater to low-income shoppers. Dollar Tree bought Family Dollar in 2015.
The companies are also capturing more affluent shoppers hunting for discounts on essentials,
Fenyo said.
Consumers may be looking to save even more money now. Inflation is rising and is expected to
continue to rise over the summer months as the
economy fully reopens.

Dollar General CEO Todd Vasos said in March that company data indicated that there was an
increase in new customers during its most recent quarter compared to the same time last year,
noting that they “skew younger [and] higher income” than traditional shoppers.
Dollar stores are able to open in areas other retailers wouldn’t because of their small size, Feno
said.
Stores are typically under 10,000 square feet, compared to 180,000 square-foot Walmart
supercenter or a grocery store, which is typically around 40,000 square feet.
“They can fit more easily into local real estate than, let’s say, a Walmart or Target or something
that’s a bigger format,” Fenyo said. “That certainly means they can go in more places.”
Dollar stores are also better protected against the rise of online shopping, said Gus Faucher, the
chief economist at PNC.
Some dollar store customers often have “less of an ability to access online retail,” Faucher said,
because of shipping fees or lack of internet access or experience shopping online. Most of the
goods these chains sell are food and daily essentials, which are less frequently purchased online
and are for immediate consumption, limiting the appeal of waiting days or more for delivery.
Other discount retailers are also opening new stores this year, including Five Below, Burlington
Stores, TJMaxx and Marshalls owner TX, Big
Lots and Aldi.

We shopped at Dollar Tree and Dollar General to see which offered a better shopping
experience, and the winner was unmistakable.

• Dollar Tree and Dollar General are the largest dollar stores in the United States and are neck-and-
neck in terms of store count and annual
sales. Based on numbers alone, the two chains are almost identical. However, there are some big
differences in the shopping experiences
you’ll have at these stores.
• In August, the two companies reported second-quarter results. Same-store sales at Dollar General
were up 3.7%, while Dollar Tree reported a more modest 1.8% growth because of weaker sales at its
Family Dollar stores.
• We put the two stores to the test.

Bargain-hunting has been the flavor of the past decade.
Since the recession, cost-conscious consumers have flocked to off-price, thrift, and dollar stores in
search of good deals. As a result, these stores
have seen a surge in sales.
From 2010 to 2015, US dollar-store sales grew to $45.3 billion from $30.4 billion, and hundreds of
stores have opened. The credit-rating

agency Moody’s said it expects this market to grow 8% in 2018. That’s about double the growth of
3.5% to 4.5% it expects for US retail in general during the same time.
Dollar General and Dollar Tree are the two largest dollar stores in the United States and based on
numbers alone, the two chains are almost identical.
Dollar Tree – and its newly acquired Family Dollar chain – have slightly more locations than Dollar
General, but both have about 14,000 to 15,000.
In terms of sales, Dollar Tree is a close second, generating $22 billion in sales in 2017 compared
with $23.5 billion at Dollar General.
But there is a massive difference in the shopping experience at these no-frills stores. First and
foremost, Dollar Tree sells only products that are $1 or under, whereas Dollar General, which once
did the same, is now more like a discount retailer.
In recent quarters, Dollar General has outpaced its main rival in terms of sales growth. In the most
recent quarterly results, reported in August, same-store sales were up 3.7% at Dollar General and
1.8% at Dollar Tree, because of weaker sales at its Family Dollar stores.
We visited both Dollar General and Dollar Tree in March to see how they compared:
We visited Dollar General and Dollar Tree stores that were a 15-minute walk from each other in
Brooklyn, New York.
Our first stop was at Dollar General. The chain has 14,761 stores in the US, most of which are
located in rural areas.

Q1. Conduct a Stakeholder analysis of Dollar General with at least four stakeholder groups. Provide
details on how each stakeholder group impacts Dollar General’s strategy and indicate whether each
issue is an opportunity or threat to the company.

Q2. Conduct a Five Forces analysis for Dollar General by identifying examples of who is in each
force and analyze the power relationship with each force. Give an overall evaluation of the
company’s power within its five forces. Provide facts and analysis to support your answers.

Q3. Identify Dollar General’s competitive advantages and disadvantages. Provide facts and analysis
to support your answers.

Q4. Provide an analysis of Dollar General’s organizational capabilities that support the competitive
advantages you have identified.
Provide an analysis of Dollar General’s lack of organizational capabilities that contribute to the

competitive disadvantages you have identified.

Q5. Based on your analyses in the previous questions, what are your conclusions about Dollar
General’s ability to be a successful
ongoing business? What recommendations do you have for the company’s CEO to strengthen its
strategy? Provide facts and analyses to support your answers.

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