Addressing the Impact of New Dollar Stores – Part 1

Dollar General – Mapleton, IA

While serving as a support driver on RAGBRAI 2018 I had the opportunity to drive through a number of rural communities in Iowa along the way. The support vehicle route for the first day went through the town of Mapleton. This quaint little town of 1,200 residents was once home to my sister.

On the western edge of the community once sat the Maple Motel. As the caravan of vehicles trudged into town I looked off to the south to get a glimpse of the inn that she once ran. But it was no more. To my surprise, in its place sat a nearly new Dollar General.

For decades now Walmart has been the poster child for the anti-big box mindset in many communities. The ire that Walmart has drawn over the years has been pretty significant due to their impact on the local “mom and pop” stores after they move into a community. The selection and low prices offered by Wally World have forced many a local retailer to close their doors.

However, a recent article on the Pantheos blog that was posted to the American Planning Association’s (APA) Small Town and Rural Planning Division’s LinkedIn group page states that there is another scourge this is affecting small town retailers. Dollar Stores. Yes, those bastions of ultra low prices. Those stores with shelves stocked with goods that often have brand names that make you scratch your head.

According to the retail analysts at Nielsen, between 2005 and 2016, the number of dollar stores have increased by 58% to more than 29,400. Dollar General alone is planning on adding 900 more stores in 2018 alone. The dollar store sector of the market is growing at a frantic pace. They have streamlined their operational model enough that the numbers work for them even in small communities.

The aforementioned article, entitled “Dollar Stores are Gutting Small Town Retailers” is an interesting read. While I don’t fully agree with some of the author’s thoughts, it was a well-written article that makes some good points.

One of the thoughts that I didn’t completely agree with is that, “Dollar stores are to small town (or in some cases tiny town) America what Walmart has been to medium to larger towns/cities….” Yes, the direct impact of a Walmart locating in those communities is similar in nature. But the economic pull factors at play when Walmart comes to town don’t just affect the host community, they affect many of the smaller communities that surround the host. So these small communities already impacted by Walmart from afar, are now being infiltrated by dollar stores.

However, the fact of the matter is, much like Walmart, these dollar stores represent sales tax. Small towns starved for sales tax dollars will find it excruciatingly hard to say “no” to such a financial impact. Even if a notable share of the “new” sales tax is actually based on reallocated sales from other local stores now conducted at the dollar store, there should be an impact. Hence, the political pressure to allow the dollar store will often outweigh the fight from local retailers against it.

It is important then to understand the impacts, adjusting regulation and policy in anticipation. That will be addressed in Part 2 of this post.