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Are Dollar Stores Bad For Business And The Community?

Are Dollar Stores Bad For Business And The Community?

By Christopher Pitts

  • Dollar stores customers earn around $40K a year 

  • Since 2011, the number of dollar stores has grown from 20K to nearly 30K

As we look across the U.S. Dollar stores have never been more popular, especially in communities of color, ultimately taking full advantage of the black dollar. Originally, these stores had been targeting food deserts, areas not served by supermarkets. While that may still be true, it also now appears they are targeting communities of color in both urban and rural areas. 

Why This Matters: New research from the Institute for Local Self-Reliance found that since 2011, the number of dollar stores has grown from 20,000 to nearly 30,000. The two largest companies in this arena are currently Dollar General (DG -0.45%) and Dollar Tree (DLTR -0.91%), which bought Family Dollar in 2015. On average, these stores have cut prices between 20-40% when compared to the local grocer. 

The business model is built on saturation, placing a high number of dollar stores in one area, dis-allowing for any level competition

It comes as no surprise that the dollar store customer segments have rarely included more affluent neighborhoods, instead concentrating in areas with both a greater percentage of households living in poverty and more minority residents. These company's core customers earn around $40,000 a year or below, which is $20,000 below the median income. 

The success of these dollar stores lies within its simple but robust business model. It is a no-frills operation, where aesthetics is the last item on the priority list. The building itself is not even owned, instead leased by the dollar store, making it easy to locate and relocate to the most prosperous location. Additionally, the business model is built on saturation, placing a high number of dollar stores in one area, dis-allowing for any level competition.

Situational Awareness: As the number of dollar stores continue to grow, they are facing scrutiny from opponents who argue that discount chains limit local competition and limit poor communities’ access to healthy food.  Last April, in Tulsa almost after a full year of rallying community members, council women Hall-Harper was able to convince City Council to enact a measure that limits dollar stores on Tulsa’s north side, and encourages the development of full-service grocery stores.  This is not only a huge step in the power of grassroots organizing, but also the black voice being heard in the business community, a model that we all hope continues. 

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