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Dollar General Betting on Better Technology

By Daniel B. Kline – Updated Apr 14, 2019 at 5:42PM

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The discount chain plans to expand its DG GO! app and add "buy online, pickup in store" as an option for customers.

When you think about Dollar General (DG 1.46%), you may focus on value, some of its off-beat generic brands, or perhaps the mild disarray that's common in its lightly staffed stores. You generally don't think of the company as being on the cutting edge of digital technology.

However, the discount chain has been working to change that. Last year it launched the DG GO! App, which allows customers to scan items on their phones while they shop, gives them a running total of their purchases, and allows them to checkout using an in-store DG GO! kiosk.

"The app has been popular with our customers and through the end of fiscal 2018, we had more than 140,000 downloads and exited the year with approximately 25,000 monthly active users, despite only having DG GO! kiosks in approximately 250 stores," said CEO Todd Vasos during the chain's fourth-quarter earnings call. "Pending performance data, our goal in 2019 will be to expand this offering to more stores."

Check out the latest earnings call transcript for Dollar General.

A Dollar General store.

Dollar General has been testing new technology. Image source: Dollar General.

Digital DG?

Dollar General has been taking a slow, measured approach to adding digital tools. It tested the DG GO! app in a small fraction of its stores to see how customers used it, and that produced some notable insights.

"One key learning is that our customers are using the card calculator frequently, even when they're not using DG GO! kiosks to checkout," Vasos said. "We believe they're using the card calculator to stay within their budgets and optimize their shopping dollars."

Based on that data the company has added the calculator tool to another 200 stores. The company plans to add the tool to the "majority" of its locations in 2019, which has required it to upgrade WiFi in many of its locations.

In addition to offering the calculator tool and having checkout kiosks in select locations, Dollar General plans to pilot a "buy online, pick up in store" offering later this year.  

"Having a user-friendly and helpful suite of digital tools is becoming increasingly important to our customers, and therefore, to Dollar General," according to the CEO. "We know that our customers, who more frequently engage with our digital tools, tend to shop with us more often and check out with larger average baskets. In fact, their baskets, on average, are about twice as large as those of non-digitally engaged shoppers."

A new kind of convenience

Dollar General has operated on the model of location being its greatest asset. The company opens in locations that put it close to its customers, making it easy for people to stop by and make small purchases.

Improved technology is a new kind of convenience that has largely been ignored by any discount chain that's not Walmart. These efforts make it easier for customers to shop at Dollar General. They can save time, or help customers stay on budget -- something that's likely very important to much of the chain's core audience.

This is not an area where Dollar General has to move fast. It should take the pulse of its customers and test extensively. The chain should allow bigger retailers to figure out what works before making any decisions or heavy investments.

Vasos deserves credit for investing in an area that most of his direct competitors have ignored. That should help the company protect its place in the market, while also increasing cart size and improving customer satisfaction.

Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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