Local grocery stores and pharmacies struggle to compete with dollar stores but rural residents view the chain stores positively. (Ohio Capital Journal photo by Graham Stokes)

The influx of dollar stores into the rural landscape can have a devastating effect on grocery stores and other small businesses in rural areas, research has found.

When dollar stores move into a rural area, independent grocery stores are more likely to close, says a new study released by the U.S. Department of Agriculture (USDA). Employment and sales fall at grocery stores wherever a dollar store is located, the researchers found, but in rural areas the effects are more profound.

“They’re going after the low hanging fruit… when it comes to being able to capture consumer sales,” Kennedy Smith, senior researcher with the Institute for Local Self-Reliance (ILSR), said in an interview with The Daily Yonder. “These are the communities that tend to be too small for a Walmart to have been there, but small enough that if there was a major grocery store chain there at some point, it’s probably gone now. They see an opportunity.”

The proliferation of dollar stores in rural areas is not an accident, Smith said. In ILSR’s 2023 report, The Dollar Store Invasion, researchers said dollar stores are more likely to be located in low-income and rural areas.

The likelihood a rural grocery store would exit the area after a dollar store moves in was three times greater than in an urban area, the USDA researchers found. Rural grocery stores saw nearly double the decline in sales (9.2%) than urban grocery stores, and saw bigger decreases in employment (7.1%). The researchers also found that in urban areas, the impact of a dollar store waned after about five years, but the effects latest longer in rural areas.

Two companies – Dollar General and Dollar Tree — own most of the dollar stores across the country, with Dollar Tree also owning all of the Family Dollar stores. Over the last four years, Dollar General has added about 3,500 locations, bringing to 18,000 the number of locations for the chain, and cementing the company’s status as the largest retailer in the U.S, according to the ILSR report.

And the number of dollar stores across the country has grown over the past two decades. Between 2000 and 2019, the study found, the number of dollar stores – including Dollar Tree, Family Dollar and Dollar General – has doubled to more than 34,000. However, earlier this year? Dollar Tree announced plans to close 1,400 of its 16,700 stores due to corporate losses in 2023. Even after those closures, there will be more dollar stores than all of the Walmarts, Targets, McDonalds and Starbucks in the U.S. combined.

ILSR’s Smith said that the companies chose places where they feel there will be little pushback to the stores opening.

“I think that they are a little predatory in choosing places where they think that political resistance is going to be weak and where it’s easy for them to come in and request that a piece of land be rezoned for commercial purposes and not get a lot of blowback from the community,” Smith said.

Kathryn J. Draeger, adjunct professor of agronomy and plant genetics at the University of Minnesota and statewide director of the university’s Regional Sustainable Development Partnerships, said dollar stores don’t just affect grocery stores.

“It’s not just the 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 getting Tylenol and cough medicine at your pharmacy, you’re getting it at the Dollar Store, and that is cutting into the business of small town pharmacies as well.”

Dollar stores also affect sales at small town hardware stores, pet stores and other retailers, she said. The closure of a small town grocery store can impact the culture of a community, she said.

“Grocery stores are part of the heart and soul of a community,” Draeger said. “It is such a hub in the community for people to connect and talk with each other. These small town stores, yes, they’re private businesses, but they do so much public good.”

Dollar stores can have a positive impact in communities, though. In a 2022 study from the Center for Science in the Public Interest, dollar stores are generally viewed by residents to provide access to food in food deserts.? To gauge the public perception of the stores, the CSPI surveyed 750 residents who live near dollar stores and have limited incomes.

“Most survey respondents (82%) indicated dollar stores helped their community,” the CSPI survey found. “Overall, dollar store chains were viewed favorably, ranking third after big box stores and supermarkets, but ahead of convenience, small food, and wholesale club stores.”

Additionally, non-profit work by the corporations give back to the communities they are in. Dollar General Inc.’s non-profit foundation, the Dollar General Literacy Foundation, provides grant funding to literacy and education initiatives at schools, libraries and other non-profit 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 United Way of South Hampton Roads near the company’s corporate headquarters in Chesapeake, Virginia.

Still, researchers found, some local communities are working to keep the stores out. According to CSPI, more than 50 communities across the country have passed ordinances to “ban, limit, or improve new dollar stores in their localities.”

ILSR’s Smith said one thing communities can do to prevent the intrusion of dollar stores is to work with county planning and zoning commissions to stop the spread of the stores. From assessing traffic issues to addressing water table problems, communities can stop 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 profits generated by those stores in the community instead of heading out of state to corporate headquarters. Supporting the 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 for the Rural Grocery Initiative at Kansas State University, said it’s not just dollar stores that cause the exit of rural grocery stores.

According to research by RGI, one in five rural grocery stores closed between 2008 and 2018. In half of the 105 Kansas communities that lost grocers, no new store had opened up by 2023.

“Rural independent grocery stores are facing a myriad of challenges and those have been building for years,” she said in an interview with the Daily Yonder. “When a dollar store comes in, those challenges come to a head.”

Aging infrastructure, population decline, aging equipment and older technology add to the hurdles rural grocery stores face to succeed.

“They are less able to take advantage of new programs like SNAP and online ordering,” she said. “Dollar stores can come in and be the last straw facing a rural grocery. It’s not a foregone conclusion that rural groceries will close when a dollar store comes into the community, but it can be harder for a small, independent grocery store to adapt to face yet another challenge.”

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