Dollar stores have experienced tremendous growth since the Great Recession. Once perceived as low-cost options in economically depressed areas with few, if any, grocery stores, they now emerge as aggressive business ventures that perpetuate inequality and segregation.
Certain communities have started to push back against the proliferation of these stores.
Video Spotlight: Don’t buy these foods at the dollar store
This post is based on the CityLab article, The Dollar Store Backlash Has Begun, by T. Misra, December 20, 2018; and on the YouTube video Don’t buy these foods at the dollar store, by Mashed, November 12, 2018. Image source: ljupco/123RF
1. What are the main advantages and disadvantages of dollar stores?
Guidance: The primary advantages include: a) offering inexpensive grocery items in low-income communities, b) providing a variety of low-cost staples, c) hiring in depressed areas, and d) filling the void left by grocery chains leaving low-income neighborhoods for more affluent ones.
The main disadvantages include: a) offering low-quality, unhealthy foods, not always at the lowest prices, b) pushing other, small grocery stores out of business, thereby exacerbating the “food desert” problem, c) providing low-pay jobs, and d) inadvertently increasing segregation.
2. What are the factors affecting dollar stores’ location decisions?
Guidance: For retail in general, access to markets is very important. For dollar stores, access to markets is linked to consumer demographics (lower-income, minority, or older individuals), economically strained urban and rural areas, tax subsidies and incentives.
3. How do you explain that Dollar Stores may promote economic distress?
Guidance: Since the number of dollar stores has substantially increased since 2008 (Great Recession), one cannot assume that their growth is merely the result of poor economic conditions. With the help of tax incentives and subsidies, dollar stores have an unfair advantage over traditional, local grocery stores and force them out of business. This further exacerbates the lack of grocery store options and therefore competition in some neighborhoods.
These neighborhoods become less attractive, causing property values to drop and higher-income individuals to leave. With less competition, dollar stores can charge higher prices, which creates a vicious circle of dollar stores opening in an area and its population getting poorer.
4. What are some communities doing to discourage the proliferation of dollar stores? Is it fair?
Guidance: Students may be divided on the fairness issue. On one hand, dollar stores do fill a need. On the other, they create a myriad of other problems. Pressed by constituents, mayors and city councils have blocked or limited dollar stores’ access to markets in their cities. Some are giving healthy grocers tax incentives to locate in “food deserts.” The idea of incentivizing healthy grocers to locate in low-income areas is good as long as the population can afford their products.