The Atlanta Journal-Constitution
Rising popularity of dollar stores shows growing income gap
Executives at Dollar General say they began seeing a rise in new customers in March 2020, just as much of the country began shutting down because of the pandemic. Its newest shoppers tend to be younger, have higher incomes and are more ethnically diverse, according to spokeswoman Crystal Luce.
Kyle Dishman, 29, who works at a Vans outlet store in West Carrollton, Ohio, said his hours were nearly halved during the pandemic, from about 35 hours a week to 20. He’s been picking up food-delivery gigs with Grub Hub, but has had to do away with trips to Kroger, where he used to spend about $150 every two weeks for his two-member household.
“Prices aregoing sky high, and my income is going in the opposite direction,” he said. “That makes buying food, even at the dollar store, kind of rough.”
‘We need better options’
There are more than 34,000 dollar stores in the United States, more than all Walmart, Starbucks and McDonald’s businesses combined. The two largest chains — Dollar General and Dollar Tree, which owns Family Dollar — make up the vast majority of them, with more than 32,000 locations. Many are concentrated in lower-income areas, and analysts say it’s increasingly common to see three, four and even five dollar stores within a few blocks of one another, making it difficult for smaller chains and grocery stores, which have thinner margins, to compete.
And despite their names, many dollar chains, including Family Dollar and Dollar General, sell items that cost $10 or more. Dollar Tree remains the only major retailer that continues to price its entire inventory for $1.
“It’s one thing to have a dollar store or a couple of dollar stores in a neighborhood, but when you’ve got them at the density
levels we’re seeing, it’s really difficult for grocery stores to open and succeed,” said Mitchell of ILSR. “Dollar stores are the No. 1 driver of ‘food deserts’ at this point.”
Food deserts, generally defined as urban areas in which the closest grocery store is more than a mile away, tend to concentrate in low-income neighbor- hoods. Several cities, includ- ing Tulsa, New Orleans, Mesquite, Texas, and Birmingham, Ala., have passed legislation restricting dollar stores from opening within one or two miles of existing locations. Other areas, like Oklahoma City’s Ward 7, are requiring that new discount stores either have a pharmacy or dedicate at least 500 square feet to fresh vegetables, fruit and meat.
“We need more than just processed foods in our communities,” said Nikki Nice, an Oklahoma City council member.
The life expectancy in a particular ZIP code in northeast Oklahoma City without fresh groceries is 18 years lower than in other parts of the city, she said, adding that the three dollar stores in the area sell packaged foods such as bread, milk and cheese, but no fresh produce. Dollar General, for example, sells fresh groceries in about 7 percent of its stores.
“We need better options, particularly in Black communities and other intentionally ignored neighborhoods, where we have been tremendously impacted by the lack of fresh groceries,” Nice said.
The pandemic has accelerated the dominance of the country’s largest retailers, including Walmart, Amazon, Kroger and Target, to the detriment of small and regional operations. That dynamic, analysts say, has been pronounced in small towns across the country. Major chains have been bet- ter positioned to handle supply chain disruptions, rising costs and labor shortages.
Growing income inequality, economists say, has also led to rising polarization among retailers. Discount chains and high-end retail- ers have in many cases fared much better than their mid- range counterparts.
Chains such as Whole Foods Market, which is known for higher-priced organic and specialty goods, have benefited from rising home prices and a rallying stock market that have boosted the fortunes of the wealthiest Americans The Austin-based grocer is adding 43 stores to its roster of 500 this year, many of them in high-income urban areas, including 11 in California, five in New York and four in Florida.
At the other end, Dol- lar General, which carries national brands such as Clo- rox, Coca-Cola, Hanes and Nestlé, keeps costs low by renting in inexpensive parts of town and keeping stores thinly staffed, analysts said. The chain, which last year posted $33.7 billion in sales, also has tremendous buying power, allowing it to keep prices within a few percentage points of Walmart’s, the world’s largest retailer, according to Anthony Chukumba, an analyst at Loop Capital Markets.
“The formula for Dollar General is small, conveniently located stores with a lot of name-brand items and very sharp pricing,” he said. “In tough economic times, we see folks trade down from grocery stores and convenience stores to dollar stores.”
Dollar General’s profits rose 4 percent to $678 million in the most recent quar- ter, prompting it to increase its outlook for the rest of the year. The chain, which is targeting younger, trendier shoppers, is opening 1,050 stores this year and remod- eling 1,750 others.
American households, on average, spent $4,643 on groceries in 2019, more than they do on rent or education, according to the most recent data available from the Bureau of Labor Statistics. That figure, economists say, is likely to have risen considerably during the pandemic, as consumers cut back on dining out.
Aside from a recent trip to Walmart, Nancie Norton has shopped exclusively at Dollar General since the coronavirus pandemic took hold early last year. She usually stops in after 9 p.m., but says she still has to wait 20 minutes in line because there are so many shoppers.
Norton, a retired teacher’s aide who lives on about $1,100 a month, says she’s begun cutting back from two trips a week to one. Prices are rising, she says, and quantities are shrinking, which means she’s having to stretch the food she does buy: milk, eggs, bread, cheese, frozen dinners and ketchup.