Dollar-Store Dominance Comes With A Cost For Low-Income Americans

With Sacha Pfeiffer

Dollar stores are popping up across the country and raking in the profits. Critics say it all comes with a cost to the nation's poor. We’re on it.

Nathaniel Meyersohn, CNN Business retail reporter. (@nmeyersohn)

Vanessa Hall-Harper, city council member in Tulsa, Oklahoma, since 2016. In 2017, she led the way to enact a measure that limits dollar stores on Tulsa’s north side and encourages the development of full-service grocery stores. (@cityoftulsagov)

Christopher Merrett, professor at Western Illinois University where he leads the Illinois Institute for Rural Affairs. (@WesternILUniv)

CNN Business: "Dollar stores are everywhere. That's a problem for poor Americans" — "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.

"Dollar stores have never been more popular. Yet a wave of cities and towns have passed laws curbing the expansion of Dollar General (DG) and Dollar Tree (DLTR), which bought Family Dollar in 2015. The companies are the two largest dollar store operators in the country, combining for more than 30,000 stores throughout the United States, up from under 20,000 a decade ago. By comparison, Walmart (WMT), America's largest retailer, has 4,700 US stores.

"Advocates of tighter controls on dollar stores say the big chains intentionally cluster multiple stores in low-income areas. That strategy discourages supermarkets from opening and it threatens existing mom-and-pop grocers, critics say.

"'The business model for these stores is built on saturation,' said Julia McCarthy, senior policy associate at the nonprofit Center for Science in the Public Interest and a critic of dollar stores. 'When you have so many dollar stores in one neighborhood, there's no incentive for a full-service grocery store to come in.'

Opponents also express concerns that dollar stores don't offer fresh produce. Dollar General and its dollar store rivals mostly sell snacks, drinks, canned foods and vegetables, household supplies and personal care products at rock-bottom prices.

"However, Dollar General and Dollar Tree argue that they benefit communities by offering shoppers convenient places to grab food and essentials at low prices.

"'In rural places without existing grocery stores, having a Dollar General might be viewed as an asset,' said Christopher Merrett, director of the Illinois Institute for Rural Affairs at Western Illinois University. Dollar stores bring in new sales and property tax revenue for cities, create jobs and expand shopping options for customers, he added.

"Dollar stores see an opportunity to grow even more in America. Dollar General and Dollar Tree have plans to open a combined additional 24,000 locations.
But lawmakers around the country are pushing back."

Seattle Times: "What to buy (or ignore) when shopping at dollar stores" — "When a friend recently polled my Pilates classmates about how to afford two graduation parties for her daughter, the answer was a unanimous 'the dollar store.' Selling everything from ketchup to charcoal grills, the ubiquitous dollar store attracts shoppers of all ages and income levels.

"'Chains such as Dollar Tree and Family Dollar (both owned by Dollar Tree), Dollar General, 99 Cents Only Stores and Five Below have become large corporations with enormous buying power,' says Diane McCrohan, associate professor in the College of Business at Johnson & Wales University.

"Once seen as dumping grounds for liquidated and off-brand merchandise, today’s dollar stores often buy their inventory from major manufacturers such as Procter & Gamble, Hanes, Unilever, Coca-Cola, Energizer, Crayola and General Mills.

"'I’m amazed by the dollar store near me in East Greenwich, Rhode Island,” adds McCrohan. 'Not only is it up-to-date and relevant to the consumer, but the visual merchandising and displays are as good as any larger retailer. Customers can feel safe shopping them.'

"But should you? Critics point out that dollar stores aren’t always good for communities, especially in urban centers with few retail options. According to the Institute for Local Self-Reliance, dollar stores take a toll on grocery stores and in many cases reduce people’s access to fresh food. That’s because few carry fresh produce and most offer a limited selection of processed food. In fact, some cities such as Tulsa, Oklahoma, have imposed restrictions on new stores."

Fort Worth Star-Telegram: "Fort Worth wants to limit future dollar stores, but what about existing ones?" — "The Fort Worth City Council is trying to find a way to limit dollar stores.

"In its work session Tuesday, the council heard a presentation from Planning and Development Director Randle Harwood after Councilman Kelly Allen Gray asked city staff in May to look into ways to stop the proliferation of low-cost box stores like Dollar General and Dollar Tree. The issue came to light after members of the Rolling Hills community tried to fight the incoming Family Dollar at Riverside and Campus drives.

"According to a report by the Institute for Local Self-Reliance, dollar stores operate on a business model of oversaturation, thereby crowding out competitors or potential competitors. In rural communities, they often become the singular source for grocery needs and in poor and underserved minority communities, they proliferate until no other business wants to locate there."

Business Insider: "Dollar stores are a billion-dollar industry. Here's how they get customers to spend more money." — "Dollar stores make billions. In 2018, Dollar Tree made $22 billion in revenue, and Dollar General's stock was worth $36.5 billion as of July 2019. The stores are designed to get customers to spend more money, from keeping product sizes small to stocking private-label goods. Dollar stores also tempt customers who like the feeling of finding a good deal.
On average, a new dollar store opens in the US every six hours."

Adam Waller produced this hour for broadcast.