Dive Brief:

• Dollar General on Monday announced the appointment of Rob Scruggs as chief digital and customer engagement officer, a newly created position in which he will lead the strategy for customer engagement including digital experience and tools, according to a company press release.

• Scruggs brings over 17 years of customer and user engagement experience, most recently from his position as global director of client experience for Bank of America Merrill Lynch. Before that, he held customer experience roles at Asurion, E*TRADE and J.P. Morgan Chase.

• His appointment comes after a series of executive hires over the summer, including Jason Reiser as executive vice president and chief merchandising officer and Carman Wenkoff as executive vice president and chief information officer. 

Dive Insight:

Scruggs' arrival could signal a move to boost e-commerce in a segment that has hewed to brick-and-mortar retail. In fact, dollar stores are among the few retailers enlarging rather than shrinking their physical footprints. Dollar General spun heads when it made a promise to build 1,000 new stores this year, adding on to its 13,205 store fleet — more than any other retailer, including Walmart.

"At Dollar General, Rob’s experience will help accelerate our digital strategy as we continue to focus on developing digital resources that can help our customers save time and money," Reiser said in a statement.

Considering the higher costs of e-commerce, however, it’s not clear how such a pivot might help with Dollar General’s essential problem of the moment, which is fierce price competition on merchandise with razor-thin margins. These days, the retailer is increasingly bested by Walmart on price, according to Gordon Haskett analyst Chuck Grom.

In a late September pricing study of dollar stores, Grom’s team found that Walmart improved its pricing proposition across competitive sets and now leads Dollar General at the low end. "For the first time since we started this study back in March, our September results show that Walmart is now priced below Dollar General," Grom said in a note emailed to Retail Dive. "To this end, the Dollar General basket is priced at a 90 basis point premium to Walmart, as compared to a 200 basis point discount just two months earlier in July."

Dollar General is now coming into a period of slimmer returns, GlobalData Retail Managing Director Saunders warned in a previous email to Retail Dive. The retailer is contending with costs like wage hikes and occupancy costs that are more enduring than the small spike it saw from a recent acquisition of stores. Plus, competitors are taking share from Dollar General in higher-margin categories, he noted.

Dollar General’s profits took a hit last quarter despite increases in sales and traffic, amid intensifying price competition in grocery and consumables. Q2 net sales rose 8.1% from the year-ago quarter to $5.83 billion and same-store sales rose 2.6%. But gross profit as a percentage of net sales shrank 47 basis points to 30.7%, mostly due to higher markdowns and a greater proportion of sales of lower-margin consumables. 

"Dollar General needs to be growing sales, and especially underlying sales, at a much faster rate," Saunders said. "It is evident from our shopper data that Dollar General customers are still buying these products, but are doing so at rivals. In our view, this is hardly surprising: when it comes to non-foods, there are now plenty of low priced retailers that do a much better job in terms of assortment, display and experience than Dollar General."

This adds up to a "bitter cocktail" though not a toxic one, according to Saunders. "[W]e believe Dollar General will remain a significant force in discount retail, and we have no doubt that, bar exceptional events, sales will rise," he said. "However, we also caution that returns on that growth will continue to wane."