Editor's Note: As part of WRAL TechWire's growing mission, an important point ahead is economic development in rural areas, from jobs to broadband. This CNN report examines the explosive growth of dollar stores and whether they are good for both rural and undervalued communities.
ATLANTA – When dollar stores sweep across the United States, they face increasing scrutiny by opponents claiming that discount chains stifle local competition and restrict poor communities' access to healthy food.
Dollar stores have never been more popular. Still, a wave of cities and cities has passed the saving of Dollar General and Dollar Tree, which bought Family Dollar in 201
Tenders for tighter controls on dollar transactions say that the large chains intentionally cluster more stores in low-income areas. That strategy discourages the opening of supermarkets and threatens existing mother and pop merchants, critics say.
"The business model of these stores is built on saturation," said Julia McCarthy, senior political associate of nonprofit science center in public interest and a critic of dollar stores. "When you have so many dollar stores in a neighborhood, there is no incentive for a full-service grocery store to enter."
Opponents also express concerns that dollar stores do not offer fresh produce. Dollar General and its dollar store rivals mostly sell snacks, beverages, canned foods and vegetables, household items and personal care products to rock bottom prices.
However, Dollar General and Dollar Tree argue that they enjoy community by offering customers convenient locations to grab food and necessities at low prices.
"In rural areas without existing grocery stores, having a Dollar General can be considered a resource," said Christopher Merrett, head of the Illinois Institute for Rural Affairs at Western Illinois University. Dollar stores bring in new sales and real estate tax revenues for cities, create jobs and expand shopping opportunities for customers, he added.
Dollar stores are seeing an opportunity to grow even more in America. Dollar General and Dollar Tree are planning to open a combined additional 24,000 locations.
But lawmakers around the country are pushing back.
Last week, Birmingham City Council, Alabama, unanimously approved legislation that would ban new store stores from opening within a mile of its existing sites.
"While dollar stores spread across the community, healthy food options dried," said Mayor Randall Woodfin of Birmingham to CNN Business. The new measure will help Birmingham to attract and keep merchants in the city's food deserts, he said.
Oklahoma City, Tulsa, Oklahoma and Mesquite, Texas, have also adopted legislation restricting the opening of new dollar stores. And New Orleans, Cleveland, and Fort Worth, Texas officials are investigating plans to limit dollar transactions in their cities.
Dollar Big Growth
Dollar stores have been around for decades. But they have flourished in the US since the 2008 recession, as more Americans were forced to tighten their spending.
Although the US economy has strengthened in recent years, the popularity of dollar stores has disappeared. Wages for large numbers of Americans have grown only modestly. People who have the paycheck to paycheck have been a boon to dollar stores, and the chains have also reached higher income travelers looking for discounts.
"While the economy is going very well, our core business continues to struggle," Dollar General Manager General Todd Vasos told analysts last year. The company's core customers earn around $ 40,000 a year or below, $ 20,000 under the median revenue.
Dollar General caters mainly to low and medium sized customers in rural and suburban areas. Dollar Tree targets suburban, medium-sized buyers, while Family Dollar focuses on lower-income home customers.
Dollar General is looking to build stores in rural areas where a ledger or grocery store is not within 15 or 20 miles. About 75% of Dollar General stores are in cities with 20,000 or fewer people, and the chain has its largest footprint in southern states. (Dollar General operates more stores in Texas alone than Costco and Whole Foods combine for nationwide.)
"Dollar General Stores often choose to locate at the edge of a rural town away from the traditional downtown" to draw customers, Merrett said. from Western Illinois University. "This is not very different from what Walmart did 30 years ago."
Dollar stores can open quickly in new areas because they are small and have lower operating costs than food stores. Dollar General stores are 7,400 square meters on average, compared to 40,000 square meters of supermarkets. And stores, which only use a handful of workers to store the hallways, are cheap to run.
But critics say that the dollar store's uncontrolled growth damages communities.
"Some communities see that dollar stores are very serious competitors to their local retail and grocery store," said David Procter, director of the Rural Grocery Initiative at Kansas State University.
Family-run grocery stores operate on razor-thin profit margins and dollar stores can push them at lower prices, experts say. Although most dollar stores do not sell fresh groceries, they offer many of the same household products and groceries as merchants. These goods are often the highest margins, and grocery owners cannot afford to lose them, Procter noted.
"When the dollar stores take most of the business, it really hurts the bottom line quite significantly," he said.
Burnell Cotlon, owner of the Lower 9th Ward Market in New Orleans, said that his grocery store suffered when Family Dollar opened up in the neighborhood. Cotlon lost valuable detergent, toothpaste and toiletries.
"I had to push harder on other items to stay afloat," said Cotlon, who received national recognition to open one of the only grocery stores in the New Orleans Lower 9th Ward, which was destroyed by Hurricane Katrina in 2005.
But the Family Dollar recently closed, which drove customers back to Cotlons store. "As soon as they stopped, my toiletries jumped back."
Other locals and business leaders are concerned that dollar store concentration in urban areas discourages grocery stores, which offer a wide range of products and healthy options, from opening.
"There are almost 100 dollar-type stores in a ten mile radius," said deserving chief executive Kelly Allen gray. "They are heavily located in low to moderate income areas, making their presence sensitive."
And Cleveland Councilman Blaine Griffin, who introduced a moratorium on the opening of new dollars, expressed concern that dollar stores did not provide fresh fruit or vegetables.
"Many of the people living in our communities live in food deserts," Griffin said. Dollar stores "run out chains that actually offer good, healthy food options."
Dollar General produces initiative
Dollar General is trying to stave off criticism that it does not sell fresh or fresh food.
It has added about 125 "better for you" items to the shelves of about 3400 stores. It plans to reach 6,000 stores by the end of 2019. The products are listed under Dollar Generals Good & Smart branding, and the store carries name tags such as Annie's, Back to Nature and Kashi.
Dollar General has started offering fruit and vegetables for the first time at around 500 stores as well. CEO Vasos said last year that Dollar General can "drive a tremendous amount of traffic" by adding raw materials to rural and urban food deserts.
But opponents like McCarthy of the Center for Science in Public Interest say Dollar Generals production effort doesn't go far enough because it only reaches a fraction of its more than 15,000 stores.