The arrival of dollar stores in rural communities often creates challenges for rural grocery shopping • Daily Montanan

Research has shown that the rise of dollar stores in rural areas can have devastating effects on grocery stores and other small businesses in rural areas.

When dollar stores open in rural areas, independent grocers are more likely to close, according to a new study from the U.S. Department of Agriculture (USDA). Employment 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,” Kennedy Smith, a senior researcher at the Institute for Local Self-Reliance, said in an interview with The Daily Yonder. “These are 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 by 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 impact of a dollar store diminished after about five years, but the effects lasted longer in rural areas.

Two companies — Dollar General and Dollar Tree — own the most dollar stores in the country, with Dollar Tree also owning all of the Family Dollar stores. Over the past four years, Dollar General has added about 3,500 locations, bringing the chain’s total to 18,000 and solidifying its 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 bit predatory in choosing places where they think the political resistance will be weak and where they can easily come in and request that a piece of land be redeveloped for commercial purposes without getting a lot of pushback from the community,” 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 grocery stores that are hurt when a dollar store comes in,” Draeger said in an interview with the Daily Yonder. “We’re also hearing that pharmacies can suffer because instead of going to the drugstore to get Tylenol and cough syrup, they’re going to go to the dollar store, and that’s going to hurt the business of small-town pharmacies as well.”

Dollar stores also affect 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 said. “They’re such a hub in the community where people connect and talk. These small town stores, yes, they’re private businesses, but they do so much good for the public.”

Dollar stores, however, can have a positive impact on communities. In a 2022 study by the Center for Science in the Public Interest, dollar stores are generally viewed by residents as a way to access food in food deserts. To gauge public perception of the stores, 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’ nonprofits give back to the communities where they operate. Dollar General Inc.’s nonprofit, 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 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 “prohibit, restrict, or permit new dollar stores in their area.”

ILSR’s Smith said one thing communities can do to prevent dollar store encroachment is work with county planning and zoning commissions to stop the spread of the stores. From assessing traffic concerns to addressing groundwater issues, communities can prevent dollar stores from coming into communities and causing harm, 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 RGI research, one in five rural grocery stores closed between 2008 and 2018. Half of the 105 Kansas communities that closed grocery stores still hadn’t opened a single new store by 2023.

“Independent grocery stores in rural areas face a multitude of challenges and have been for years,” she said in an interview with the Daily Yonder. “When a dollar store comes along, those challenges come to a head.”

Aging infrastructure, declining population, outdated equipment and outdated technology are some of the obstacles rural supermarkets face in achieving success.

“They may not benefit as much from new programs like SNAP and online ordering,” she said. “Dollar stores can be the straw that breaks the camel’s back for a rural grocery store. It’s not a foregone conclusion that rural grocery stores will close if a dollar store comes into the community, but it can be harder for a small, independent grocery store to adapt to yet another challenge.”

This article originally appeared on The Daily Yonder and is republished here under a Creative Commons license.