The Dollar Stores: Exploitive or Empathetic?

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Ten miles is the average distance that 90 percent of the U.S. population would have to go to reach one of Walmart\’s roughly 4,700 stores. That is often cited as the real competitive advantage over Amazon for convenient shopping, pick-up and delivery. It took Walmart more than half a century to roll out their enormous national fleet, along with their equally large international footprint of another roughly 7,000 stores. In the U.S., this march to retail supremacy began in the mid-60s sparked by the vision of Sam Walton to provide everyday low prices for small-town and rural America. In doing so, and by offering all of life\’s basic necessities including groceries, many saw Walmart as a predator that wiped out small businesses as it invaded one town after another across the country. On the other hand, no one can deny that consumers benefitted greatly from Walmart\’s enormous selection of merchandise for unbeatable low prices, thus rewarding Walmart its status as the largest retailer in the world.

For those small-town retailers who were crushed by the behemoth, Walmart could be viewed as negatively exploitive. However, an opposite and positive view is that Sam Walton saw a need among average folks to be served with the value they could afford. One perspective on Walton\’s vision would, therefore, be his empathy for the common man.

Small Town Competition

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Fast forward, and today there is another retail model that is being viewed by many as exploitive of low income-consumers who live in small towns, rural areas and in low-income suburban communities. This would be the three major dollar store chains, currently numbering about 32,000 in the U.S., (about 7,000 Dollar Tree, around 8,000 Family Dollar, owned by Dollar Tree since 2015 and 16,500 Dollar General stores). When you compare Walmart\’s 4,700 stores to the dollar 32,000 and still growing to a projected 55,000 stores in three years, how far away do you think 90 percent of the population in those low-income areas would be to reach one of those three chains? The answer: How about across the street or within walking distance in their neighborhoods.

Dollar Boom

Retail industry store closings were about 10,000 in 2019, and according to Coresight Research, another projected 25,000 will close in 2020. Dollar General, on the other hand, will be opening 1,000 stores in 2020 (up from 975 in 2019) and the combined Dollar Tree and Family Dollar stores will be opening about another 500 (325 Dollar Tree and 175 Family Dollar).

[callout]When you compare Walmart’s 4,700 stores to the dollar 32,000 and still growing to a projected 55,000 stores in three years, how far away do you think 90 percent of the population in those low-income areas would be to reach one of those three dollar store chains?[/callout]

How could this be? Most of the remaining retail sectors (excluding Walmart, Target, Amazon and a few others) are either on life support or actually dying, while the pandemic, an economic recession and civil unrest show no signs of letting up.

And that\’s not all folks. Dollar General\’s net income soared to $650 million in the quarter ending May 1, 2020 up from $385 million in the same period last year (or $2.56 a share vs. $1.48 LY and above analysts\’ expectation of $1.75). Sales rose 27.6 percent to $8.4 billion, beating analyst estimates of $7.6 billion and same store sales jumped by 21.7 percent (context: Walmart up 10 percent). While the consolidated numbers of Dollar Tree and Family Dollar were not as robust, most other retail sectors could only wish for their increase in net sales of 8.2 percent to $6.29 billion when the \”street\” was expecting $6.14 billion. And same store sales for Dollar Tree increased 7.0 percent and Family Dollar jumped 15.5 percent.

Exploitation

The Institute for Local Self Reliance ethos \”challenges concentrated economic and political power, and instead champions an approach in which ownership is broadly distributed, institutions are humanly scaled, and decision-making is accountable to communities.\” The Institute claims that the dollar store chains target struggling mid-to-low income small towns and suburbs. They state that \”Although dollar stores sometimes fill a need in places that lack basic retail services, there\’s growing evidence that these stores are not merely a byproduct of economic distress. They\’re a cause of it. In small towns and urban neighborhoods alike, dollar stores are leading full-service grocery stores to close. And their strategy of saturating communities with multiple outlets is making it impossible for new grocers and other local businesses to take root and grow.\” While most of the dollar stores do not carry fresh produce, fruit or meat, many do have refrigerated foods, and Dollar General does have fresh produce delivery in some locations. So, not yet classified as grocery stores, there\’s no reason they can\’t expand into the category over time. Walmart\’s first grocery store was not launched until 1988, over 25 years after they opened their first discount store. They now own a 30 percent share of the total grocery market.

The Institute says, \”Walmart\’s super-charged growth left small-town retail in shambles. By building massive, oversized supercenters in larger towns, Walmart found it could attract customers from a wide radius. Smaller towns in the vicinity often suffered the brunt of its impact as their Main Street retailers weakened and, in many cases, closed. Today the dollar chains are capitalizing on these conditions, much like an invasive species advancing on a compromised ecosystem. Local grocers that survived Walmart are now falling to Dollar General. \”This has become the number one challenge of grocery stores,\” says David Procter, an expert on community development and director of the Rural Grocery Initiative at Kansas State University.\”

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