This month, a number of Dollar General vendors reportedly have received an email from Emily Taylor, the retailer's executive vice president and chief merchandising officer. This is what the email says:
Dear Dollar General Vendor:
We are very excited to share with you that we are opening our nineteenth dry goods distribution center (DC) in Blair, NE. Our timeline and plan for product flow roll-out are being communicated to you separately. The new be will be located at the following main address:
Dollar General Distribution Center (#96540)
1200 South 10th Street
Blair, NE 68008
The Blair DC, like all of our DCs, will be instrumental in our continued business expansion. Each new DC represents a considerable investment, especially in inventory.
As in the past, as we grow so do opportunities for you. Therefore, we will be charging a one-time new DC allowance to help offset the start-up costs of the Blair DC. We will calculate the allowance as follows:
Ten percent (10%) of the estimated cost of purchases required to fully stock the new
DC to support regular shipments to the assigned store base.
As we begin DC operations, we will calculate the initial allowance and deduct it by the planned date of January 23, 2023. Supporting calculations will be provided at that time. As we complete the rollout of the assigned store base, we will deduct the remainder of the allowance in 2023.
Our partnership with you is important, and we look forward to continued success together. Thank you.
- KC's View:
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I wanted to make sure I had this straight, so I reached out to a vendor that received the letter to be sure. The vendor confirmed my understanding of the email: Dollar General is going to charge all their vendors basically 10 percent of expected/projected 2023 purchases by the warehouse, and then deduct that amount from whatever invoices the vendors submit.
The vendor also told me that to his knowledge, this is a unique construct.
I'd go farther than that. I'd suggest that Emily Taylor's definition of the word "partnership" is a little different from mine.
Dollar General may be celebrating its "considerable investment," but it is laying off some of that investment on companies that want to sell product through its stores. This is sort of the ultimate slotting allowance - you have to pay to play. I was curious, so I looked up the word "extortion" … and it is defined as "the practice of obtaining something, especially money, through force or threats." What Dollar General is doing may be legal, but it strikes me as not very collaborative.
Emily Taylor may be writing the letter, but it sounds like Dollar General got negotiating lessons from the Corleone family. She is making vendors an offer they can't refuse.
