Cheaper dollar stores could cost communities, researchers say

Editor’s note: This article has been updated to include a statement from Dollar General.

(NewsNation) — As more Americans turned to dollar stores to offset increased grocery prices over the past year, some researchers say the growing reliance on the cheaper option could do more harm than good for communities, particularly those already strapped for resources.

Despite their convenience and low prices, money redirected from grocery stores to dollar stores can chip away at communities, said Kennedy Smith, a senior researcher with the Institute For Local Self-Reliance.

“In rural communities in particular, where price sensitivity and sale sensitivity is so vital for grocery stores to succeed, every dollar that a customer takes away from an existing food store is going to hurt that community,” Smith said.

As the prices of basic goods climb, dollar stores are seeing new clientele. A majority of Dollar Tree’s new customers recorded over the previous year came from households that made about $80,000, the company’s CEO, Mike Witynski said during an August 2022, earnings call.

Dollar Tree, Inc., which owns both Dollar Tree and Family Dollar, saw a 5.4% increase in net sales last quarter, reaching a total of $7.31 billion, according to the company’s latest earnings report. That’s partially thanks to increased traffic, according to the report, which also highlighted the addition of frozen and refrigerated food items across 920 Dollar Tree stores.

The number of independent grocers significantly declines when new dollar stores enter a neighborhood, according to research from the University of Toronto and the University of California, Los Angeles. The impact is equal to the loss of about one grocery store for every three dollar stores within a 2-mile radius.

When communities lose grocery stores in exchange for dollar stores, shoppers buy about 4-7% less fresh produce. That decline is significantly steeper for low-income households, the study suggests.

“It is a tragedy that people in America are making those decisions, and consciously making decisions to buy the food that they know is less healthy and of poor quality and poor value,” Smith said.

Dollar General noted in an emailed statement to NewsNation that although it’s not a grocery store, the company works “alongside local grocers and business owners to collectively meet customers’ needs.”

“We believe each new store represents positive economic impact through the increased affordable access to goods; new jobs and career growth opportunities; the ability for nonprofits, schools and libraries to apply for DGLF grants and the generation of local tax revenue that can be reinvested into the community,” Dollar General said.

Dollar Tree, Inc. did not immediately respond to NewsNation’s request for comment. The company’s website cites its mission of delivering “extreme value” to customers.

When it comes to value, however, dollar stores aren’t universally guaranteed to offer the best savings ounce-for-ounce and pound-for-pound. Notably, not all shoppers can afford to buy in bulk and may opt for lower prices out of necessity, even if they aren’t getting as much bang for their buck.

In a comparison of Walmart and Dollar General goods, Dollar General was “slightly cheaper overall” but item-by-item, Walmart was the cheaper option for five out of nine products, according to an analysis by The Ascent.

Chain dollar stores don’t often use models that circulate money back into the local area, either, Smith said.

It’s common for developers to sell the buildings on the secondary market, meaning when rent is paid, it’s not staying within the community.

Some local leaders have responded with zoning laws to keep dollar stores away. Others have denied the construction of new stores based on community health concerns and emphasized urban farming opportunities to retain access to fresh produce.

“There are a lot of exciting things are happening out there to make it easier for people in cities and in small towns to supplement their diets, raise a lot of the healthy food that they need, and then be able to depend on stores for shelf-stable stuff that they can’t grow themselves.”

Dollar stores are still pervasive, however. About 75% of the U.S. population lives within 5 miles of a Dollar General, according to the company’s website.  

Dollar General and Dollar Tree have plans to expand the 35,000-plus locations they have now for a combined total of 51,000 outlets, Smith reported for ILSR.