Local supermarkets and pharmacies struggle to compete with dollar stores, but rural residents are positive about the chain stores. (Ohio Capital Journal photo by Graham Stokes)
Research has shown that the influx of dollar stores into rural areas could have a devastating effect on grocery stores and other small businesses in rural areas.
When dollar stores move to a rural area, independent grocers are more likely to close, a new study from the U.S. Department of Agriculture (USDA) finds. Jobs and sales decline at grocers that also have a dollar store, the researchers found, but the effects are greater in rural areas.
“They’re going after the low-hanging fruit… in terms of being able to capture consumer sales,” said Kennedy Smith, senior researcher at the Institute for Local Self-Reliance (ILSR), in an interview with The Daily Yonder. “These are the communities that are often too small to have had a Walmart, but small enough that if there ever was a major grocery chain, it’s probably gone now. They see an opportunity.”
The proliferation of dollar stores in rural areas is no coincidence, Smith said. In ILSR’s 2023 report, The Dollar Store Invasion, researchers said dollar stores are more likely to be found in low-income and rural areas.
A rural grocery store was three times more likely to leave the area after a dollar store moved in than an urban one, the USDA researchers found. Rural grocery stores saw nearly twice as much decline in sales (9.2 percent) as urban grocery stores, and saw a larger decline in employment (7.1 percent). The researchers also found that in urban areas, the dollar store’s impact faded after about five years, but the effects lasted longer in rural areas.
Two companies – Dollar General and Dollar Tree – own the most dollar stores nationwide, while Dollar Tree also owns all Family Dollar stores. Over the past four years, Dollar General has added approximately 3,500 locations, bringing the number of locations for the chain to 18,000 and cementing the company’s status as the largest retailer in the U.S., the ILSR report said.
And the number of dollar stores across the country has been growing over the past two decades. Between 2000 and 2019, the study found, the number of dollar stores — which include Dollar Tree, Family Dollar and Dollar General — doubled to more than 34,000. But earlier this year, Dollar Tree announced plans to close 1,400 of its 16,700 stores due to operating losses by 2023. Even after those closures, there will be more dollar stores than all of Walmarts, Targets, McDonald’s and Starbucks in the U.S. combined.
ILSR’s Smith said the companies have chosen locations where they expect there will be little resistance to opening the stores.
“I think they’re being a little predatory in picking places where they think the political resistance is going to be weak and where it’s easy for them to come in and request that a piece of land be rezoned for commercial purposes without getting a lot of community pushback,” Smith said.
Kathryn J. Draeger, associate professor of agronomy and plant genetics at the University of Minnesota and state director of the university’s Regional Sustainable Development Partnerships, says dollar stores aren’t just affecting supermarkets.
“It’s not just the supermarkets that will be hurt if a dollar store comes,” Draeger said in an interview with the Daily Yonder. “We’re also hearing that pharmacies may be suffering because instead of getting Tylenol and cough syrup from the pharmacy, they’re getting them from the Dollar Store, and that’s hurting the business of small-town pharmacies as well.”
Dollar stores are also impacting sales at small town stores, pet stores and other retailers, she said. The closure of a small town store can affect the culture of a community, she said.
“Grocery stores are part of the heart and soul of a community,” Draeger says. “They’re such a hub in the community where people can connect and talk to each other. These small town stores are private businesses, yes, but they do so much public good.”
However, dollar stores can have a positive impact on communities. In a 2022 survey from the Center for Science in the Public Interest, dollar stores are generally viewed by residents as providing access to food in food deserts. To gauge public perception of the stores, the CSPI surveyed 750 residents who live near dollar stores and have limited incomes.
“Most survey respondents (82%) said dollar stores helped their communities,” the CSPI study found. “Overall, dollar store chains were viewed positively, ranking third behind big box stores and supermarkets, but ahead of convenience stores, small grocery stores, and wholesale club stores.”
Additionally, the companies’ nonprofit organizations give back to the communities in which they operate. Dollar General Inc.’s nonprofit foundation, the Dollar General Literacy Foundation, provides grants to literacy and education initiatives at schools, libraries and other nonprofit organizations near its stores. Dollar Tree also participates in community giving by partnering with dozens of charitable organizations across the country, including Operation Homefront, the Boys & Girls Clubs of America and the United Way of South Hampton Roads, located near the company’s headquarters in Chesapeake, Virginia.
Still, researchers found that some local communities are working to keep the stores out. According to CSPI, more than 50 communities across the country have passed ordinances to “ban, restrict, or improve new dollar stores in their area.”
ILSR’s Smith said one thing communities can do to prevent the encroachment of dollar stores is work with county planning and zoning commissions to stop the stores’ spread. From assessing traffic issues to addressing groundwater issues, communities can prevent dollar stores from coming into communities and causing damage, she said.
By supporting local grocery stores instead of larger chains, Smith said, community leaders and elected officials can keep the profits generated by those stores in the community instead of going to corporate headquarters. Supporting local stores also supports good-wage jobs, local families and economic development. Like the closure of a rural hospital, she said, the closure of a rural grocery store can impact a community’s ability to attract new people and new businesses to the area.
Rial Carver, program director of the Rural Grocery Initiative at Kansas State University, says it’s not just dollar stores that are driving grocery stores out of rural areas.
According to research by RGI, one in five national supermarkets closed between 2008 and 2018. Half of the 105 Kansas communities that lost grocers had no new stores opened by 2023.
“Independent grocery stores in rural areas face a lot of challenges and they’ve been building for years,” she said in an interview with the Daily Yonder. “When a dollar store comes in, those challenges come to a head.”
Aging infrastructure, population decline, aging equipment and older technology contribute to the barriers rural grocery stores face to succeed.
“They are less able to take advantage of new programs like SNAP and online ordering,” she said. “Dollar stores can come in and be the last straw for a national supermarket. It is not a foregone conclusion that country stores will close if a dollar store comes to the community, but it may be more difficult for a small, independent grocery store to adapt to yet another challenge.”
This article first appeared on The Daily Yonder and is republished here under a Creative Commons license.
The arrival of Dollar stores in rural communities is adding to rural grocery challenges, says USDA research that first appeared on Kentucky Lantern.
