Lawyers for tighter controls on dollar stores say the big chains intentionally cluster more stores in low-income areas. This strategy discourages supermarkets from opening and threatening existing mother-and-pop merchants, critics say.
"The business model of these stores is built on saturation," said Julia McCarthy, senior political affiliate at the Nonprofit Center for Science 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 at rock bottom prices.
However, Dollar General and Dollar Tree claim that they have benefits for communities by offering customers convenient locations to pick up food and necessities at low prices.
"In rural areas without existing food stores, having a Dollar General can be considered a resource," said Christopher Merrett, director 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.
"While dollar transactions spread throughout 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.
Dollar store growth
Dollar stores have been around for decades. But they have flourished in the US since the 2008 recession when several 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 pay paycheck to paycheck have been a boon to dollar stores, and the chains have also reached higher revenue buyers looking for discounts.
"While the economy is doing very well, our core customer continues to fight," said Dollar General, Todd Vasos, 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 urban and rural customers.
Dollar General seems to be building 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 runs 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 from Western Illinois University said. "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.
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 stores," 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
Burnell Cotlon, owner of the lower 9th floor market in New Orleans, said that his grocery store suffered as Family Dollar opened in the neighborhood. Cotlon lost valuable detergent, toothpaste and toiletries.
But the Family Dollar recently closed, which drove customers back to Cotlons store. "As soon as they closed, my toiletries jumped up again."
Other local residents and business executives are concerned that dollar store concentration in urban areas discourages grocery stores, offering 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 do not offer 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 healthy or fresh food.
Dollar General has begun to offer fruit and vegetables for the first time at around 500 stores as well. CEO Vasos said last year that Dollar General could "drive a tremendous amount of traffic" by adding raw materials to rural and urban food deserts.
But opponents like McCarthy from the Center for Science in Public Interest say the dollar generals production effort doesn't go far enough because it only reaches a fraction of the company's more than 15,000 stores.