Are dollar stores bad for cities?

Discussion
Photo: Dollar General
Dec 28, 2018
Matthew Stern

Dollar stores may have good prices, but they’re developing a bad reputation.

Customers and municipalities alike are no longer so enamored with the popular retail format, according to Treehugger, which cites a new study about the negative impact dollar stores appear to have on local economies. The study, by the Institute of Local Self Reliance (ILSR), suggests that dollar stores are not only a byproduct, but a cause of economic distress — and a force that perpetuates it. Insurmountable competition among local retailers, low store staff requirements (meaning fewer local jobs), poor and unhealthy food selections and prices that are actually higher than full low-price grocers all contribute to a net negative for cities. In fact Tulsa, OK has taken steps to stop the spread of dollar stores in low-income neighborhoods.

The ILSR study comes amid announcements that,  although considered primarily rural phenomenon, one of the biggest dollar store chains in the country is ramping up the pace of its big urban expansion. Dollar General recently announced that it would be opening 13,000 new stores, almost doubling its current store count.

In some cases, Dollar General has even opened in stores spaces once occupied by grocery chains with a reputation for a more full-service offering. In 2016, Dollar General moved into 40 Walmart Express locations vacated when Walmart ended the format.

But not all the news about dollar stores is negative. In all 2,700 of its locations, Dollar General has added 125 “better for you” products to its shelves, according to a report by ABC Action News.  

The chain has also begun to build out a small store concept meant to appeal specifically to urban Millennial shoppers called DGX which will presumably have a healthier food selection.

And while last year a New York Times article revealed that in New York the influx of dollar store chains had been negatively impacting the existing mom-and-pop dollar store economy, there was also an apparent upside. The chains seemed to be pushing some independent store owners to up their offerings to better meet community needs and compete with the chains.

DISCUSSION QUESTIONS: Are dollar stores as bad for cities as opponents claim? What might a dollar store backlash mean for the big dollar store chains and their strategies?

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Braintrust
"If the past few years have taught us anything, it’s that we are a nation of very different people, and we seek and buy according to what we like and can afford."
"While dollar stores do not inspire me to celebrate the greatness of humanity, it’s not fair to fault them for thoroughly understanding their business niche and executing..."
"What I think about Dollar General really doesn’t matter, as it is up to the consumer to choose how and where they spend their money."

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17 Comments on "Are dollar stores bad for cities?"


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Dr. Stephen Needel
BrainTrust

So I’m sure there’s no bias in a study run by ILSR — really?! Doesn’t this sound like the argument against Walmart coming into a community years ago? Dollar General will sell what people will buy. If people will buy healthier food options, Dollar General will sell them — they aren’t stupid. That they offer a lot of junk food is not the cause of problems, it’s the result of problems, and we should stop placing that responsibility on retailers’ shoulders. There won’t be backlash.

Bob Amster
BrainTrust

There is too much competition in big cities that already sell healthful products, and are low priced. I would think that the dollar-store format does better in underserved, lower-rent areas.

Mark Heckman
BrainTrust

If urban shoppers of all demographic stripes are looking for low prices, cluttered stores and off brand merchandise, dollar stores are just what the doctor ordered, irrespective of any social or economic effects on the communities they serve. That is the niche that dollar stores have created and seized. Certainly the success of these stores creates new competitive pressures for local merchants (mom and pops), but isn’t that the essence of a free marketplace? Ultimately, both dollars stores and their urban competitors will become better retailers due to the competition. The communities they serve should encourage that competition, not hinder it.

Zel Bianco
BrainTrust

If the past few years have taught us anything, it’s that we are a nation of very different people, and we seek and buy according to what we like and can afford. If Dollar General stocked “good for you items” my guess is that they would not attract the demographic that tends to shop there.

Ian Percy
BrainTrust

I’m still working on exactly what “problem” we’re discussing. Dollar stores sell cheap stuff cheap. Isn’t most of retail trying to win the “race to the bottom” in terms of pricing? These stores don’t hire many people. Wouldn’t most retailers like to cut back on employee expenses? They are a threat to the mom and pop stores we all remember from our youth. Face it, those good old days have been in the retail cross hairs since the advent of malls in ’92 and before that by Walmart in ’62.

Any “backlash” (aka jealousy, aggravation, entitlement) will come from retailers who can’t figure out how to claim a profitable space in the consumer’s mind and wallet. What that brutal reality points to is that unless they start thinking differently and stop trying to hang on to what was, dollar stores will be the least of their problems. There are retail possibilities no one has thought of yet. Seeing them is the challenge.

Gene Detroyer
BrainTrust

The question should not be “Are dollar stores bad for cities?” It should be “Are dollar stores bad for people?” When asked that way you get your answer. Dollar stores provide needs, otherwise they would not exist. If these needs exist in cities (they certainly do), then Dollar stores belong there.

If they are replacing other stores, it is because those other stores did not meet the people’s needs. The argument against dollar stores in cities says lets give local residents a less than optimal offering because…

I am sorry. I can’t come up with what comes after “because…”

Rich Kizer
BrainTrust

Dollar stores are not operated by idiots. Either they make money or they stop paying rent. I really believe they fill needs: in rural areas they sometimes are the only close retailer, in urban areas they can supply items needed by stressed budgetary customers. Here we go again; this sounds like the old comments made during the introduction of Walmart stores. We live in a wave of change.

Doug Garnett
BrainTrust

The moral arguments I’ve seen against dollar stores in the city are always stated by those with enough money to maintain “high standards”. And that is quite concerning.

Dollar stores offer a value – or they wouldn’t have succeeded as much as they have. Outside cities, they are often the ONLY local retail left. I recently traveled U.S. 36 across northern Kansas and there was a dollar store in every town — towns far too small for Walmart, Target, or any more “morally appropriate” stores. And my well-off relatives out that way shop at them.

I’m also reminded by the scene the Supersize movie of a cash-strapped family able to buy protein in a McDonald’s hamburger for less than a single apple. Unless the U.S. decides to subsidize the food chain to make fresh food affordable, this is a business reality.

Let’s re-focus the question: Do dollar stores help people in the U.S. be able to afford the things they need? Absolutely.

Richard J. George, Ph.D.
BrainTrust

A story which is much ado about nothing. The focus should be on the impact to customers, not competitors. This is analogous to viewing Uber and Lyft in terms of their impact on taxis and limos. Their collective success suggests overwhelming acceptance by the ride sharing market. End of story.

Tony Orlando
BrainTrust
What I think about Dollar General really doesn’t matter, as it is up to the consumer to choose how and where they spend their money. We have probably 20 or more just in our county, and the largest one shares a common wall, as it sits right next to me. Center store in rural towns has hurt traditional grocers very hard, and this will continue to get worse, as staples are sold for cost or less, which makes the bottom line very difficult to stay in the black, and I have lost three quarters of a million dollars in sales to them in the last 6 years. Oh well, it is still up to me to find the niches, and I have a 53% mix in sales in Meat/Deli and Bakery, which at least pays the bills. Location, and economic conditions, are the main factor for their success, as they do very well in our area, but in Beachwood, or Dublin Ohio, not so much, and that is simply how it is is. Independents have… Read more »
Craig Sundstrom
Guest

Let’s just come out and say it: poor people are “bad for cities” because they use more in services than they provide in revenue. Of course that’s a rather silly, or at least limited way of looking at things, and I feel the same about the ILSR report (I’ll save the scare quotes on “report,” but their very name makes me question how objective it is).

Whatever one’s view of this sector, it has a small impact on poverty … being the result of it far more than the cause.

James Tenser
BrainTrust

While dollar stores do not inspire me to celebrate the greatness of humanity, it’s not fair to fault them for thoroughly understanding their business niche and executing against it very effectively.

“Selling cheap stuff cheap” is a low-operating-cost model that will naturally tend to include packaged shelf-stable foods and exclude perishables, fruits and vegetables. Such a store will hardly be an oasis within an urban “food desert” — but that’s not its intent.

I suppose some deeper questions might be, “Do dollar stores prevent other food sellers from thriving in inner-city neighborhoods?” and, “How do neighborhood residents benefit when a dollar store operates there?”

Bob Phibbs
BrainTrust

I live in a rural hamlet of about a thousand in upstate New York. We have Dollar General, Family Dollar and another one I can’t recall. The local economic development agency hates this because it impinges other retailers moving to the area — it looks like there is no market for anything other. This isn’t about big cities, but about these types of stores lowering the bar to keep consumers in that market segment trapped from ever being able to grow their local economy beyond dollar stores.

Ananda Chakravarty
BrainTrust

This question is more closely tied to gentrification than anything else. Just as homeowners in a high-end neighborhood don’t want low priced housing built near their homes, cities with higher value districts don’t want to attract customers buying cheaper stuff. There is an expectation that dollar stores bring fewer $ and will deteriorate rents, average incomes, and encourage unhealthy living standards. Everyone wants to live uptown. This will cause a slight bump for discount stores but nothing more. Even rich people like to save a buck — and not everything needs to be made of platinum.

Richard Layman
Guest
7 months 17 days ago

True but in my community history/commercial district revitalization days, I was surprised to learn that in the 1950s, S.S.Kresge had a “lower income market” brand called “Jupiter” for where Kresge stores were no longer the right fit.

William Passodelis
Guest
7 months 20 days ago

How out of touch and disingenuous of the ILSR. Ridiculous.

For people struggling and living paycheck to paycheck, and trying to make rent and put food on the table — and there are a lot of people in that situation — dollar stores provide a small respite. Those low prices and “cheap” goods might provide a mom with the opportunity to have a pack of cookies in the house for the week, or splurge and try a different color of nail polish, for example. To place blame on these retailers for doing what they set out to do? Again, ridiculous. If you personally do not want to live near one of these stores, move.

Matthew McAlister
Guest

Many of the critiques of dollar stores are legitimate:

  • Products seem to be cheaper. Often that’s just because you’re getting less quantity;
  • Fresh produce isn’t readily available;

Others, less so:

  • Dollar stores drive other stores out of business.

Ultimately, it’s the consumer who decides what businesses thrive. Trying to regulate dollar stores is applying a tourniquet. Educating consumers to make smarter choices is preventative health care.

It would be more effective for municipalities to partner with local grocers to educate the public about the pricing and fresh produce issues. Supply responds to demand. If consumers demand fresh produce and better value, all retailers (including dollar stores), will respond.

wpDiscuz
Braintrust
"If the past few years have taught us anything, it’s that we are a nation of very different people, and we seek and buy according to what we like and can afford."
"While dollar stores do not inspire me to celebrate the greatness of humanity, it’s not fair to fault them for thoroughly understanding their business niche and executing..."
"What I think about Dollar General really doesn’t matter, as it is up to the consumer to choose how and where they spend their money."

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