conix
3 years ago
With prices creeping up, more Americans are turning to dollar stores
Abha Bhattarai
The Washington Post
Aug. 20, 2021
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Kyle Dishman can't afford to shop at the local grocery store anymore. Instead he goes to Dollar General, where he can make $40 stretch into a week's worth of groceries and the occasional can of motor oil for his Chrysler 300.
He sticks with pasta, frozen pizza and canned vegetables, fully aware that "any food you can buy for only $1 is not the greatest for you." But Dishman says prices have gone up so much that he's started rationing his food.
"When you only have a certain amount to spend, it's like, why not just go to the dollar store?" he said.
A growing number of Americans are relying on dollar stores for everyday needs, especially groceries, as the coronavirus pandemic drags into its 18th month. Chains such as Dollar General and Dollar Tree are reporting blockbuster sales and profits, and proliferating so quickly that some U.S. cities want to limit their growth. The 1,650 dollar stores expected to open this year represent nearly half of all new national retail openings, according to Coresight Research.
Foot traffic at the largest such chain, Dollar General, is up 32% from pre-pandemic levels, far outpacing the 3% increase at Walmart, one of the few retail winners of last year, according to Placer.ai, which analyzes shopping patterns using location data from 30 million devices.
Analysts say the explosive rise of dollar stores is yet another example of how the pandemic has reshaped the economy and widened the gulf between the wealthiest and poorest Americans. Rising grocery prices - inflation is up 5.4% from last year - coupled with disproportionately high job losses among low-income workers have left many of the most vulnerable Americans in even worse shape.
"It's a striking disparity: In this country, there is now dollar-store land and there is Whole Foods land," said Stacy Mitchell, co-director of the Institute for Local Self-Reliance, a nonprofit advocacy group. "And if you live in Whole Foods land, it's very hard for people to understand just how desperate circumstances are for the rest of the country."
Dollar stores, which sell any number of name-brand items, including snacks, toys and holiday decor, have been proliferating for years, particularly in impoverished and rural areas where they are often the only major retailers. The pandemic, though, ushered an influx of new shoppers - including many who had previously been able to buy in larger, more cost-efficient quantities at big-box chains. But with smaller paychecks and rising prices, they say it's no longer feasible to stock up elsewhere.
Executives at Dollar General say they began seeing a rise in new customers last March, just as much of the country began shutting down because of the pandemic. Its newest shoppers tend to be younger, have higher incomes and be more ethnically diverse, according to spokeswoman Crystal Luce.
Dishman, 29, who works at a Vans outlet store in West Carrollton, Ohio, said his hours were nearly halved during the pandemic, from about 35 hours a week to 20. He's been picking up food-delivery gigs with Grub Hub, but has had to do away with trips to Kroger, where he used to spend about $150 every two weeks for his two-member household.
"Prices are going sky-high and my income is going in the opposite direction," he said. "That makes buying food, even at the dollar store, kind of rough."
There are more than 34,000 dollar stores in the United States, more than all Walmart, Starbucks and McDonald's businesses combined. The two largest chains - Dollar General and Dollar Tree, which owns Family Dollar - make up the vast majority of them, with more than 32,000 locations. Many are concentrated in lower-income areas, and analysts say it's increasingly common to see three, four and even five dollar stores within a few blocks of one another, making it difficult for smaller chains and grocery stores, which have thinner margins, to compete.
And despite their names, many dollar chains, including Family Dollar and Dollar General, sell items that cost $10 or more. Dollar Tree remains the only major retailer that continues to price its entire inventory for $1.
"It's one thing to have a dollar store or a couple of dollar stores in a neighborhood, but when you've got them at the density levels we're seeing, it's really difficult for grocery stores to open and succeed," said Mitchell of ILSR. "Dollar stores are the No. 1 driver of 'food deserts' at this point."
Food deserts, generally defined as urban areas in which the closest grocery store is more than a mile away, tend to concentrate in low-income neighborhoods. Several cities, including Tulsa, New Orleans, Mesquite, Texas, and Birmingham, Ala., have passed legislation restricting dollar stores from opening within one or two miles of existing locations. Other areas, like Oklahoma City's Ward 7, are requiring that new discount stores either have a pharmacy or dedicate at least 500 square feet to fresh vegetables, fruit and meat.
"We need more than just processed foods in our communities," said Nikki Nice, an Oklahoma City council member.
The life expectancy in a particular Zip code in northeast Oklahoma City without fresh groceries is 18 years lower than in other parts of the city, she said, adding that the three-dollar stores in the area sell packaged foods such as bread, milk and cheese, but no fresh produce. Dollar General, for example, sells fresh groceries in about 7% of its stores.
"We need better options, particularly in Black communities and other intentionally ignored neighborhoods, where we have been tremendously impacted by the lack of fresh groceries," Nice said.
The pandemic has accelerated the dominance of the country's largest retailers, including Walmart, Amazon, Kroger and Target, to the detriment of small and regional operations. That dynamic, analysts say, has been pronounced in small towns across the country. Major chains have been better positioned to handle supply chain disruptions, rising costs and labor shortages.
Growing income inequality, economists say, has also led to rising polarization among retailers. Discount chains and high-end retailers have in many cases fared much better than their midrange counterparts.
Chains such as Whole Foods Market, which is known for higher-priced organic and specialty goods, have benefited from rising home prices and a rallying stock market that have boosted the fortunes of the wealthiest Americans The Austin-based grocer is adding 43 stores to its roster of 500 this year, many of them in high-income urban areas, including 11 in California, five in New York and four in Florida.
At the other end, Dollar General, which carries national brands such as Clorox, Coca-Cola, Hanes and Nestlé, keeps costs low by renting in inexpensive parts of town and keeping stores thinly staffed, analysts said. The chain, which last year posted $33.7 billion in sales, also has tremendous buying power, allowing it to keep prices within a few percentage points of Walmart's, the world's largest retailer, according to Anthony Chukumba, an analyst at Loop Capital Markets.
"The formula for Dollar General is small, conveniently located stores with a lot of name-brand items and very sharp pricing," he said. "In tough economic times, we see folks trade down from grocery stores and convenience stores to dollar stores. With inflation pushing prices higher, we're starting to see that phenomenon again."
Dollar General's profits rose 4% to $678 million in the most recent quarter, prompting it to increase its outlook for the rest of the year. The chain, which is targeting younger, trendier shoppers with a new concept called Popshelf, is opening 1,050 stores this year and remodeling 1,750 others.
American households, on average, spent $4,643 on groceries in 2019, more than they do on rent or education, according to the most recent data available from the Bureau of Labor Statistics. That figure, economists say, is likely to have risen considerably during the pandemic, as consumers cut back on dining out.
Aside from a recent trip to Walmart, Nancie Norton has shopped exclusively at Dollar General since the coronavirus pandemic took hold early last year. She usually stops in after 9 p.m., but says she still has to wait 20 minutes in line because there are so many shoppers.
Norton, a retired teacher's aide who lives on about $1,100 a month, says she's begun cutting back from two trips a week to one. Prices are rising, she says, and quantities shrinking, which means she's having to stretch the food she does buy: milk, eggs, bread, cheese, frozen dinners and ketchup.
"I've tried to slow down a little bit and do without until I can afford to go again," said Norton, 67, who lives in Panama City, Fla., with her 98-year-old mother. She said her shopping options have been limited since Hurricane Michael destroyed a number of businesses in late 2018. "We buy everything we need at Dollar General. The things they don't have, we do without."
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Shoppers streamed into a Dollar General in Mount Rainier, Md., on a recent weekday afternoon, picking up cases of paper towels, boxes of frozen pizza rolls and cans of sparkling water. One shopper, Deborah, said she'd taken two buses in search of affordable household staples. She bought batteries, a serving bowl and a cupcake at Dollar Tree before picking up cleaning spray at a nearby Dollar General. The prices at the local Giant, Safeway and Harris Teeter grocery stores have been creeping up, she said, making everyday items like paper towels and plastic wrap more expensive.
"I was going to get batteries at Harris Teeter, but they were so expensive - $7 for four - that I said, 'Let me just go to the dollar store,' " said Deborah, who did not want to be identified by her full name.
At Dollar Tree, she picked up five batteries for $1. "They used to be even cheaper," she said. "They used to come six to a pack."
In Roselle Park, N.J., Alan Gatto has begun stopping by his local dollar store almost every day now that prices are ticking up elsewhere.
And though package sizes are shrinking - paper towels, for example, have gone from 140 sheets per pack to 100 - he says prices for most everyday goods, such as cat litter and milk, are still more reasonable than at the nearby supermarket.
"It looks like inflation is coming back, so I worry about prices going up," the 75-year-old said. "But at the dollar store, a dollar is a dollar."
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