When dollar stores open in rural places, local independent grocers take more of a hit than their urban counterparts

Rural groceries are less likely to survive a dollar store opening.
(USDA graphic)

The local grocery has long been an important fixture in small-town life. But as dollar stores have popped up across the country, rural grocers have had a more difficult time staying open than their urban counterparts, report Keenan Marchesi, Sandro Steinbach, and Rigoberto A. Lopez for Amber Waves. "In 2015, independent grocers represented about half of the food retailers in 44 percent of U.S. counties. Leading up to 2015, however, dollar stores were becoming increasingly visible in rural counties, according to the USDA Economic Research Service research."

Researchers analyzed data from urban and rural grocers from 2000 to 2019 to determine how a new dollar store's entry affected independent grocery stores. Amber Waves reports, "Results showed that when a dollar store opened in a census tract [rural or urban], independent grocery retailers were 2.3% more likely, on average, to exit the market. Employment at independent grocery stores fell about 3.7%, and sales declined by 5.7%"

ERS chart

The data revealed a contrast in the economic impact of a dollar store opening in a rural area compared to an urban one. "For instance, the likelihood of an independent grocery store exiting a rural census tract after a new dollar store opened was 5%, about three times greater than in urban census tracts," Marchesi, Steinbach and Lopez explain. "Similarly, the decline in employment in rural tracts was about 2.5 times as large as in urban tracts, and the decline in sales was nearly double in rural census tracts."

The research also showed that a rural independent grocery store was less likely to rebound from the negative financial impact caused by a dollar store opening. By contrast, urban independent grocers were able to weather a dollar store's entry. Amber Waves reports, "This could reduce grocery store options in rural areas for the longer term. Dollar stores generally have a more limited selection of food products, focusing more on prepacked and processed foods." When a local rural grocery closes and doesn't return, residents' access to fresher, healthier food will at least in part be decided by what dollar stores choose to stock, which could ultimately hurt a community's overall health.