Dollar stores take money out of towns and can deep-six other retailers; study suggests ways to mitigate their effects

A Dollar General store at Cunningham, Tenn., is one of a few with a mobile health clinic.

The ubiquitous growth of dollar stores can harm small towns' economies, writes Steve Dubb for Nonprofit Quarterly. "Dollar stores often function as economic kudzu, spreading relentlessly and cutting off the flow of dollars to homegrown businesses. It's not rare for dollar stores to swamp an entire community. . . . Chain stores take profits out of communities; local stores keep resources in communities. . . . Increasingly, dollar stores are driving 'grocery stores and other retailers out of business,' according to a recent report by the Institute for Local Self-Reliance."

Dubb provides a prime example: "In 2019, NP published a detailed study about the closure of a food co-op that had opened three years before in a Black community in Greensboro, N.C. From 1998 to 2016, that community lacked a full-service grocery store; the co-op's opening marked a triumphant moment after many years of community organizing. . . . So, why did the co-op effort fall short? As the study's authors, Marnie Thompson, Sohnie Black, and Ed Whitfield, detail, the community co-op failed in large measure because it came 'under direct pressure from more than 30 dollar stores within its two-mile radius.'"

To put the number of dollar stores into perspective, "There are more dollar stores nationwide than locations of McDonald's, Starbucks, Target, and Walmart combined," Dubb writes. The chains, which go by Dollar General, Dollar Tree and Family Dollar (the last two have common ownership), employ tactics that include locating in a lower-income area, near an already established local grocery and using "the Walmart business model where they squeeze suppliers by leveraging 'their power as major buyers to coerce suppliers into providing them with special package sizes and lower prices while charging independent grocers more and restricting the products available to them.' Mitchell, Smith, and Holmberg point out that this is illegal price discrimination—a violation of the Robinson-Patman Act of 1936, a New Deal-era antitrust law. Still, it is also very common given lax antitrust enforcement."

Despite the concept's numbers and tactics, there's a lot a community can do to prevent dollar stores from becoming their town's "kudzu." Dubb explains, "One common policy strategy is to mandate a minimum set distance between store locations. . . . Typically, laws restricting dollar stores are enacted in large cities, but rural communities also have mobilized. The ILSR report authors give a few examples of such rural campaigns, including one from Morgan, Minn., a town of 800 people, in which a petition drive of 100 people stopped a dollar store project, and one from Algansee, Mich., a small township near the Indiana state line with a population of 1,817. In that town, more than 200 residents—over 10 percent of the town's population—showed up at a local planning meeting to oppose a permit for a dollar store to be built across the street from the community's local grocery store; not surprisingly, the town commissioners voted down the dollar store's proposal."

But such cases are uncommon, and more can be done to change dollar stores' dominating effect, Dubb writes" "Mitchell, Smith, and Holmberg contend that local activists need help from state and federal policymakers. . . . reviving enforcement of the Robinson-Patman Act that limits price discrimination," Dubb notes. "A second priority, the authors contend, is to support local finance. . . . State governments can play an important role by reinforcing local planning agency authority to reject developments that are not in accord with community needs," and by "reinforcing local planning agency authority to reject developments that are not in accord with community needs. This can be done, for instance, by making dollar stores 'a conditional use that requires approval from the municipality (that is, it is a use that is never allowed "by right") and further clarifying that local governments may reject these stores on a wide range of grounds, including if they are likely to have a detrimental effect on the local economy or access to fresh food." In many states, localities can impose such restrictions without a change in state law.