Family Dollar Supports Merchandising with IT

Published on October 26, 2009 | Comments: 0
Dollar store retailer Family Dollar, which is in the midst of repositioning categories and expanding its assortment of lower-priced consumables, plans to aid those strategic initiatives with in-depth analysis of transaction log data. Family Dollar is licensing the Market Basket Analyzer solution from Applied Predictive Technologies (APT) to gain an edge in its merchandising strategy. Family Dollar has been using the APT Test & Learn platform for several years to optimize activities such as labor operations and capital investment. By adding Market Basket Analyzer to the platform, Family Dollar hopes to more precisely measure and optimize marketing and merchandising initiatives through drill-downs into customer transaction data. In May 2009, Family Dollar joined the growing trend of non-supermarket retailers expanding their assortment of food and consumable products and began increasing shelf space assigned to these items. Family Dollar’s decision was prompted by a roughly 9% increase in Q2 2009 sales, driven in part by 13% increase in sales of consumable goods, which include food, pet food, CPG products and HBC items. However, Family Dollar partially blamed the impact of expanding its assortment of consumables, which are generally low-margin items, for lower-than-expected net sales growth in Q4 2009. Family Dollar also cited the impact of repositioning categories to create better merchandise adjacancies. Despite this negative impact of its merchandise repositioning activities, Family Dollar still expects comparable store sales to increase 3-5% and net sales to increase 5-7% during both Q1 2010 and the entire fiscal year. Family Dollar projects 200 new store openings during fiscal 2010. Among other potential benefits, Family Dollar undoubtedly seeks to fine-tune its repositioning program with optimized transaction data in order to prevent any negative impact on net sales in the future. Family Dollar’s decision to leverage this type of merchandising data optimization is the latest signal that dollar stores, which traditionally do not use sophisticated IT systems, are thriving in the current recession. Recent research from The Nielsen Company indicates that dollar stores are gaining popularity among middle- and upper-class consumers, and are outpacing other CPG retail channels among shoppers of all income levels. This type of merchandise optimization in the low-margin consumables category is more typically found in the supermarket or supercenter verticals. For example, in July 2009 Winn-Dixie said it would roll out the SAF SuperStore application to automate inventory orders at the store level, thus optimizing orders based on existing levels, forecasted sales and other localized statistics. By optimizing store-level inventory, Winn-Dixie intends to reduce out-of-stocks, thereby increasing sales revenue.

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