Dollars & Sense: 6 Common Misconceptions About Dollar Stores

A couple months back, I was visiting friends in the small agricultural town of Paonia, Colorado. If you’ve ever been to Paonia, you know that that town’s identity is entirely wrapped up in food. Although the past 80+ years of the region’s economy was fueled by coal mining, the sudden closure of two of the area’s three local mines in 2014 left the region in economic shock. Food, and farming, is largely what stepped up to fill the void—both for the local economy and the region’s larger identity. Today, Paonia is celebrated for having more organic farmers per capita than any other region in the state.

With that in mind, you can imagine the reaction this small agricultural community of 1,500 might have when Dollar General proposes to set up shop in town.

When my friend broke the news about Dollar General’s proposal, we were sitting at the town’s Cherry Days festival, celebrating the community’s agricultural heritage and the power of local food. Our friends at the table were local business owners, farmers, and winegrowers—all of whom had moved to Paonia specifically because of food and farming. The town’s culture and economy—not to mention my friends’ incomes—are built around fresh, local, healthy food. What impact might this Dollar General have on their town, livelihoods, and local economy? Needless to say, reaction to the news was vehement.

Over the next few weeks, I sparked a lot of conversations with friends and neighbors about dollar stores and their impacts on local communities and economies. While I heard a lot of opinions on both sides of the argument, I continually ran into 6 common misconceptions regarding the benefits of dollar stores—

1. Dollar stores provide much-needed food in food deserts.

Dollar stores target food deserts, but they do not serve them. A food desert is an area where people lack access to food. And not just any food, as the USDA reminds us, but fresh, healthy, nutritious food. While most chain dollar stores do target food deserts as prime locations to open up shop, they do little to provide the needed nutrients that those areas so desperately need. By bringing a plethora of unhealthy food options into areas that are in critical need of healthy food, dollar stores only help to perpetuate very real health disparities.

On top of that, dollar stores have long been known to put locally-owned small retailers out of business. In the case of Paonia—a town that is currently well-stocked with fresh, nutritious, local food and small food retailers—a new dollar store could very well create a food desert.

2. Dollar stores provide more affordable food.

Yes, dollar stores do provide incredibly cheap food—but those low prices come with a significant cost. By specializing on highly-processed and nutrient-poor food products, dollar stores are able to use their low prices to undercut other locally-owned food retailers. Not only is this bad for business, it floods the local market with unhealthy products that are seductively cheap. This price point also requires importing mass-produced foods from outside of the region, which directly contradicts the often herculean efforts that some communities (like Paonia) are making to develop resilient local food economies.

3. Dollar stores provide jobs.

Yes, dollar stores provide jobs—but if the opening of a dollar store results in the closing of one similarly sized local employer, then the net gain in local jobs may be closer to zero. And if that dollar store puts multiple small employers under, then you may have a net employment loss on your hands.

Additionally, building a strong economy is not always just about creating jobs, but creating local ownership as well. More on that in a bit.

4. Dollar stores generate tax revenue.

Again, while an individual dollar store should generate some tax revenue, the net loss in revenue from other retailers needs to be taken into account. As our RESTORE report finds, small businesses in downtown cores tend to generate more tax revenue per square foot than their big-box and small-box counterparts. When a dollar store cuts the sales of a local retailer—especially a downtown retailer—the tax revenue loss for the town can be significant.

And then there’s the leakage effect. As reported by the American Independent Business Alliance, for every dollar you spend at a local business, 48 cents will get spent again at other local businesses in the community—effectively recirculating those dollars within town. Conversely, every dollar spent at a chain store results in only 14 cents getting recirculated within the community. When dollars get recirculated locally they not only multiply the amount of tax revenue those dollars can generate, they contribute towards supporting community ownership and long-term community wealth as well.

5. Dollar stores are familiar to visitors and would attract their dollars.

While it may be impossible to know if this claim is true or not, we do know that it’s bad news, either way. If visitors and tourists are highly attracted to dollar stores, then this attraction is likely to the detriment of small, local retailers. In smaller communities where dollar stores tend to set up shop on highways or collector streets outside of the urban core, this attraction may even dissuade passers-by from visiting central retail districts.

On the flip side, we certainly know that community character and authenticity are major drivers of tourism. So while a dollar store may attract an already-present visitor looking for a quick snack or eyeglass repair kit, dollar stores, in general, do little to actually attract those tourists to town in the first place. What’s more, if a dollar store weakens a local business that is contributing to the town’s authenticity and attracting tourism, then it can certainly be argued that dollar stores may contribute to a decrease in tourism traffic overall.

6. Dollar stores make small towns feel more modern, developable, and open for business expansion.

As found in our Place Value report, the overall quality of the community is the largest contributing factor that business owners and entrepreneurs consider when deciding where to start or move their business. That means that building great, authentic places where people want to be is key to encouraging economic growth. Do dollar stores contribute the unique sense of place and authenticity that drives local economies today? I’ll let you answer that one for yourself.

Dollar Stores Continue to Sprout

A few weeks after visiting Paonia, I found myself visiting Colorado’s West End region—the westernmost portions of Montrose and San Miguel Counties. Similar to Paonia and Delta County, the West End region fell into economic and cultural shock after a drop in uranium prices in the 80’s forced the closure of local mines. Today, the area is looking back to its agricultural roots and building up a food economy they hope can grant them economic resilience.

Part of our visit included meetings at the Fresh Food Hub, a local food retailer in the small town of Norwood (population 500) which has become greatly revered by the community. Not only does the Fresh Food Hub provide fresh, local, nutrient-dense food to the town, they also provide a much-needed market for local farmers, as well as a distribution and support system for a growing number of local food entrepreneurs.

Thumbing through veggies in the produce section of the Fresh Food Hub, you can hear the local rumblings murmuring from across the aisle—a Dollar General might be coming to town.



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