Finally there is starting to be a backlash to dollar stores which have pretty much usurped the vacated landscape of retail stores in commercial areas. For a while planners used to say that if there was a dollar store on a block, you knew that the area’s commercial square footage was cheap, as it was seen as one of the most marginal businesses around.
But Dollar Stores have become the new normal, providing items often at a fraction of the cost of other retail stores. In the United States the two largest dollar store operators have 30,000 locations, a 33 percent increase in a decade. Now they are coming under scrutiny for squeezing out local retail and reinforcing food deserts and accessibility to healthy and fresh food for locals.
As dollar stores sweep across America, they are facing growing scrutiny from opponents who argue that discount chains stifle local competition and limit poor communities’ access to healthy food.
Critics say that the dollar stores cluster in lower income neighbourhoods and squeeze out competition, making it challenging for local grocery stores. While dollar stores have junk food and colas, they don’t have milk and fresh vegetables and fruit.
Dollar stores always do well during economic recessions, and continue to thrive in areas where people do not have rising incomes.
Here’s the dollar store’s strategy as reported by CNN’s Nathaniel Meyersohn: “While the economy is doing very well, our core customer continues to struggle,” Dollar General chief executive Todd Vasos told analysts last year. The company’s core customers earn around $40,000 a year or below, $20,000 below the median income.
Dollar General caters mainly to low-and-middle-income customers in rural and suburban areas. Dollar Tree targets suburban, middle-income shoppers, while Family Dollar focuses on lower-income urban and rural customers.
Dollar General looks to build stores in rural areas where a big box retailer or grocery store is not within 15 or 20 miles. Around 75% of Dollar General stores are in towns with 20,000 or fewer people, and the chain has its biggest footprint in southern states. (Dollar General has more stores in Texas alone than Costco and Whole Foods do combined.)
Dollar stores can open quickly and use one quarter of the space of the traditional grocery store. They also function with minimal staffing as compared to a grocery store.
Viewed as a plus in rural areas with no access to other stores, Dollar General and Dollar tree plan to open another 24,000 locations. But there is now a push against these retailers, with Birmingham Alabama not allowing new dollar stores to open within a mile of other dollar store locations. This is to attract and encourage grocery stores in the denser parts of the city which have food deserts
The cities of New Orleans, Cleveland and Fort Worth Texas are also examining restricting dollar stores in their boundaries.
With family owned grocery stores making minimal profit, dollar stores can offer lower prices. The household products and daily essentials sold at dollar stores are the high margin items that are needed to make local grocery businesses survive. That is why limiting their location to allow for grocery stores that can provide a range of nutritious food as well as other products is increasingly seen as vital in the residential lower income areas of American cities.
Here’s a YouTube video produced in 2018 that outlines the issues with the locations of Dollar Stores.
The video is very good in hitting the right issues and framing them as a collective vs individual benefit argument.
I think that it’s a blend of the Wal-Mart coming to town and undercutting issue and the department store as dinosaur question.
Is the full service grocery store the dinosaur that full service department stores are?
Especially in small towns that can’t support an alternative full service category killer like Wal-Mart?
If Dollar General is the ‘go to’ place for boxed, canned and packaged grocery items (middle of the store items), that may create local opportunities for more specialized produce/farmer markets, bakeries and butcher stores.
Ultimately, customers are out to maximize their purchasing power (and having more food is better than less higher priced food), but are also responsible for balancing their diets (looking elsewhere for fresh meat and produce). Small town USA residents may not be the most health conscious, however.
I don’t know if trying to prop up a potentially dying/unviable retail model (full service grocery) in small town areas is the best response (i.e. in areas where Wal-Marts move in, existing retailers can change their offerings to specialize and differentiate themselves from the category killer). The other thing to remember is that the full service grocery store itself is a model that replaced individual butchers, bakeries, produce stands and dry goods stores.
Not all dollar stores are the same as Dollar General. There’s a California-based chain, with 350 stores, called 99c Only Stores. They sell fresh produce as well as the usual dollar store merchandise. (Mangoes are on sale at 99c this week). In some parts of California they took over abandoned ‘Fresh & Easy’ locations, a failed attempt by UK grocer Tesco to enter the US market. (That was an expensive mistake, reported to have cost Tesco nearly two billion dollars). We all have an interest in the success of 99c Only; in 2012 the company went private with 2012 by partnering with Ares Management and the Canadian Pension Plan Investment Board.