#Expert Insight: Here’s what can happen when dollar stores move in

Jan 4, 2024

3 min

Rigoberto A. Lopez, Ph.D.

Dollar stores - they're everywhere and on of America's fastest growing retail options. From the outside looking in, the idea of dollar stores seem like a win/win all around -- cheaper food, cheaper toys, and just about cheaper everything on offer to consumers looking to save money.


However, recent research by UConn Professor Rigoberto Lopez might be pulling back the curtain on the bad deal these new outlets are selling to consumers and communities.


Dollar stores have proliferated in recent years, and a study by a University of Connecticut economist has found that they contribute to less healthful food choices in the neighborhoods where they open.

That’s because independent grocery stores tend to close in the same areas where the dollar stores open, according to professor Rigoberto Lopez, whose research focuses on agricultural economics.

“The dollar store expanding is the fastest-growing retail format, and we also have seen a lot of family, independently owned grocery stores going out of business,” Lopez said.

“So we try to link the two and to find not just a statistical correlation, but also we find that indeed when the dollar store comes to the neighborhood these stores tend to go out of business as well.”

The low-priced dollar store — primarily Dollar General, Family Dollar and its subsidiary, Dollar Tree — “is the most successful type of format that is proliferating all across the United States, especially in rural areas and food deserts, which are the more underserved areas,” Lopez said.

According to the study, published in Applied Economic Perspectives and Policy, there were 35,000 dollar stores in the United States in 2019 and they were “among the few food retailers” that grew in revenue after the Great Recession of 2008-10, outperforming big box discounters and retail clubs.

Between 2000 and 2019, dollar stores opening in a neighborhood resulted in a 5.7% drop in independent grocery store sales, a 3.7% decrease in employment and a 2.3% increase in the likelihood of the grocery stores closing, according to the research.

The effects are three times more likely in rural than urban areas, the study found.
The dollar stores tend not to offer fresh produce and meats, with foodstuffs being limited to canned and boxed goods.

“In general they provide an unhealthier food assortment … and less services,” Lopez said. “They don’t have bakery, butchers, they don’t have a lot of these.”



The article also discusses not just the economic aspects, but public health implications as well.


Lopez said the dollar stores’ business model is “low prices, low cost, low quality. … But a lot of the food that they sell is not healthy. It’s processed foods that they can store. Keeping fresh food and vegetables costs money.”

Dollar stores are not necessarily a negative, if there was not a grocery store in the area before, Lopez said.

“Public health advocates, they’re against dollar stores, but a lot of people that visit the dollar store, they prefer to have a dollar store than not to have anything at all in some areas. … But in general … we find if they are driving some of the local businesses out, then that is the negative trend.”


Food insecurity and the changing landscape of grocery stores are important topics, and if you have questions or are looking to cover, then let us help.


Rigoberto Lopez is the DelFavero Professor of Agricultural Economics at the University of Connecticut's College of Agriculture, Health and Natural Resources Department of Agricultural and Resource Economics.


He is an expert in food systems, marketing, industrial organization, and public policy. Simply click on his icon now to arrange a time to talk today.



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Rigoberto A. Lopez, Ph.D.

Rigoberto A. Lopez, Ph.D.

Professor

Professor Lopez is an expert in food systems, marketing, and industrial organization.

Food SystemsMarketingIndustrial OrganizationPublic Policy

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