Janine Jackson interviewed the Institute for Local Self-Reliance’s Kennedy Smith about the proliferation and impact of chain dollar stores for the June 14, 2024, episode of CounterSpin. This is a lightly edited transcript. 

As the American Prospect (1/19/24) reports, Dollar General has also been fined by New York and sued by Ohio and Missouri for business practices that harm consumers.

Janine Jackson: Some listeners may have seen the story of Dollar General stores in Missouri being caught cheating customers by listing one price on the shelf, then charging a higher price at checkout. It’s a crummy thing to do to folks just trying to meet household needs. And yet it’s just one of many harms dollar stores—some call them deal destinations—are doing to communities across the country. What’s the nature of the problem, and what can we do about it? 

Our guest has been tracking the various impacts of chain dollar stores and their proliferation, as well as what can happen when communities and policymakers fight back. Kennedy Smith is a senior researcher with the Independent Business Initiative at the Institute for Local Self-Reliance. She joins us now by phone from Arlington, Virginia. Welcome to Counterspin, Kennedy Smith.

Kennedy Smith: Thank you.

JJ: Well, dollar stores are sort of like fancy restaurants. If they aren’t part of your life, you might not even physically notice them. But they’ve been proliferating wildly in recent years. In 2021, as the Institute’s report, “The Dollar Store Invasion,” begins, nearly half of new stores that opened in the US were chain dollar stores, a degree of momentum with no parallel in the history of the retail industry. 

Now, I want to talk through specific problems, but could you maybe start by talking about where these stores are and what’s giving rise to them, which connects directly to what they do?

KS: Basically, they are everywhere. They are in 48 states now. They haven’t quite made the leap yet to Hawaii and Alaska, but they began—the two major chains, Dollar General, which is headquartered in Tennessee, and Dollar Tree/Family Dollar, which is now in Virginia Beach, Virginia—began by radiating out from their headquarters. And so we see heavy concentrations of them sort of in the east and the southeast. They are now marching across the country and entering all kinds of markets. 

And they have slightly different profiles. Dollar General tends to be a little more rural. They tend to go into smaller rural communities. Dollar Tree tends to be more suburban, and Family Dollar tends to be located primarily in urban neighborhoods. 

And they are being fueled by a variety of factors, including consolidation in the grocery industry and people’s desire to find more affordable food and products in general are driving people to believe that dollar stores are offering them a better value. 

And in fact, that’s one of the tricks that the dollar stores play on people, is that they actually are getting poor value and usually paying more in a per ounce or per pound basis than they might be if they were shopping at a traditional, independently owned grocery store or hardware store or office supply store, whatever it might be.

JJ: It sounds like they’re filling a need, like they’re reaching to an overlooked group of people. And it reminds me a little of check-cashing stores, where folks who are oppressed economically in terms of their wages, so they don’t get to bank in a regular way, and then these fill-in spots show up and it’s perverse, you know. 

But it’s also just not how a lot of folks think things work. They see these things, oh, these are cheap stores. These are for folks who can’t afford as much as, you know, maybe some others. And this is filling their need. That’s exactly what it’s not doing. 

So let’s start on this “17 problems” that you engage in a pullout piece of the Institute’s work on this. What are some of the big things you lift up as the harmful impacts?

ILSR’s report on dollar store impacts

KS: Well, I should mention, to begin, that these are 17 of the problems that we hear mentioned most frequently, but there are plenty of others. And there are slight variations around the country. For example, in areas of the country that are susceptible to flooding and to hurricanes, there’s a lot more concern about the environmental impact of these stores and what it might mean in terms of stormwater runoff, because one of the problems with dollar stores in general is that they tend to have a very thin operating model. They’re thinly staffed. They look for inexpensive land. They build cheap buildings if they’re building new buildings. And so they’re not likely to want to afford to put in stormwater retention basins and things like that. So there’s some regional variations. 

But in general, the things that we find to be the biggest problems are, one, their economic impact on the community, and two, their sort of social impact on a community. In terms of the economy, they are a direct threat to independent grocery stores. And there are a number of studies now that have come out that have looked at what that impact is. 

There’s one that the USDA did last year, which found that basically grocery store sales will decline by 10 percent when a dollar store enters the market. There was one that was done by the University of Toronto and UCLA in 2022 that found after looking at 800-some dollar stores, that when you have three dollar stores within a two mile radius of one another, they’re likely to kill a grocery store that’s there. 

And that has a huge impact on a community because grocery stores are really community anchors in many ways and are responsible for providing their community members with healthy food as opposed to the sort of overly preserved things that you’re likely to get at a dollar store, like a box of macaroni and cheese or a box of sugary cereal or something like that. When a community loses its grocery store, it can be devastating. 

And the same thing can be true for some of the other categories, industry categories on which dollar stores tend to compete, like hardware and like office supplies and school supplies. Those are important anchor businesses for communities that people don’t want to lose. 

On the sort of social side of things, there are a number of problems and probably first and foremost is crime. Because they are so thinly staffed, dollar stores are easy targets for robberies. It’s very easy for someone to come in and just reach into the cash register, grab cash and leave. And communities complain about this all the time. I have literally hundreds of news articles that I’ve clipped about dollar store crime. 

They also have poor labor practices. They pay their workers less than the independently owned grocery stores that they’re threatening. They tend to promote workers to assistant manager relatively quickly, which means that they’re then exempt from overtime, and they make them work 40, 50, 60, 70 hours a week. They’ve been sued several times, both of the major chains, successfully by groups of workers or former workers for wage theft for exactly that. 

There are other things, too. One of the things that we have observed and a researcher actually at the University of Georgia in the Geography Department has reported on and written about is that they tend to target black and brown neighborhoods. Dollar General, for example, 79 percent of its stores tend to be located in majority minority neighborhoods. And we think this is a little bit parasitic. And we also think that they’re looking for places where the community is likely not to have as much influence at City Hall as somebody in another neighborhood. And we think that’s just despicable.

JJ: Well, if I could just bring you back to that economic impact for a second, because it’s not that they are able to deliver better things cheaper, just to spell that out. That’s not what they’re doing.

A More Perfect Union investigation found that Dollar General frequently charges more than its competitors for staple goods but “masks the high cost from consumers by stocking smaller pack sizes.”

KS: Correct. No, they’re selling similar products, but the packaging that they’ll sell them in tends to be smaller. And therefore, on an ounce-by-ounce basis, we find that the products are often actually more expensive for consumers to buy. It’s a practice called “shrinkflation.” There are a couple of other names that it goes by—”cheater sizes.”

JJ: So it’s not, well, they just build a better mousetrap. That’s how capitalism works. That’s not what’s going on.

KS: Yeah. You know, it’s funny that you mention capitalism because in communities that are where a dollar store has been proposed to be built and the community kind of comes out and opposes it, the people who tend to support the idea of the dollar store coming in tend to say, well, that’s just capitalism. That’s just free market economics.

It isn’t. Free market economics are based on having a level playing field. And that’s why all of our major antitrust laws were developed a century ago, because we wanted for small businesses to be able to compete on the same playing field as bigger businesses. One of the things that dollar store chains often do is that they will go to their suppliers, their wholesalers, and say, we want you to offer this product to us, but not offer it to our competitors, do not offer it to grocery stores. Or we want you to make a special size for us of a package that no one else can get. And we can price it the way we want. 

Those are blatant violations of federal antitrust laws. And I think that on a federal level, we need to begin paying attention to that. And the same thing at the state level, while communities themselves are doing what they can to fight dollars for proliferation at the local level.

JJ: OK, I don’t shop at dollar stores. I’m just a taxpayer. Why should I care about the issue of dollar store proliferation as a taxpayer?

KS: Well, I think there are a number of reasons, but one of the biggest reasons I would think as a taxpayer is that tax revenue that would normally accrue to the community, and wages that would normally accrue to the community, are now leaving the community, and they’re going to a corporate headquarters where they’re being either reinvested in corporate expansion, or they’re being distributed to shareholders or being used to pay off their investors. 

There’s an example that we cite in one of our reports about Haven, Kansas, which had a local grocery store that was there that was paying $75,000 a year in property taxes. So the city was getting that revenue. A dollar store came in, a Dollar General store came in, and within a couple of years, the grocery store couldn’t hold on anymore. The dollar store had eked away just enough of its sales that it couldn’t hold on. And so it closed. The dollar store was paying $60,000 a year in property tax. So the city right off the bat is losing $15,000 a year in property tax revenue that it had before. 

But not only that, as a concession to attract the dollar store, the city council had agreed to basically rebate half of the municipal utility taxes that the dollar store developer would have paid for two years. That was $36,000. So now all of a sudden the grocery store is gone and the city is losing $51,000 a year in property tax revenue. 

And that’s just an example of tax revenue. We’re not even talking about the wage differential and the fact that dollar stores typically only have one or two staff employed at a time, whereas a grocery store might have 30 or 40 people employed. And the dollar store, Dollar General, is at the rock bottom of the 66 largest corporations in terms of hourly wages. So the community is just losing right and left.

JJ: Right. Well, what happens when communities recognize that, and they resist these dollar stores? I know that the Institute tracks that as well.

KS: Dollar General tends to work with developers who build buildings for them that they then lease for 15 years, usually with three five-year expansion options. And the developer is going to try to minimize costs. And so the developer tends to look for inexpensive land, which tends to be land that is often zoned for agricultural use, or on a scenic byway, or in some kind of rural area, or maybe on the edge of a residential neighborhood. 

And to do that, they have to go to the city generally and request a zoning variance. And that’s where the battles tend to develop, is people come out and say, no, we want this area to remain zoned like it is, because there was a reason for that, that we wanted it zoned that way. And we don’t want to change that. I’ve tracked 140 communities now that have defeated dollar stores. And in 138 of those, all but two, they’ve been defeated based on the city denying a zoning variance request. 

The other two—it’s something pretty exciting that’s happened recently. In Tangipahoa Parish, Louisiana—which is where Hammond and Ponchatoula is, if you know Louisiana—last spring, a developer came to the Planning Commission and submitted plans to build a Dollar General store. It was an unzoned parcel of land. There was no zoning, so he wasn’t requesting a zoning variance. He simply had to have his building plans approved. 

The Planning Commission turned him down. And they turned him down based on their police power to protect the health, safety and welfare of the community, which is a completely novel approach. We had not seen that happen before. The developer appealed that to the parish council. The parish council supported the Planning Commission. 

The developer then sued. And last September, the trial took place. And then in November, the judge—in a, you know, this is a pretty conservative part of the country—the judge ruled in favor of the parish and said that they were completely correct in using their police power to protect the health and safety of the community by denying that developer the right to build a dollar store there.

JJ: Wow.

KS: This is a kind of groundbreaking thing. There’s another community that we found, Newton County, Georgia, used essentially the same approach. So we’re getting to have now sort of a body of case law that provides a precedent for a community saying, wait a minute, forget, I mean, zoning is one thing, but these stores are unhealthy for our community. They’re not good for the economy. They’re not good for jobs. They’re not good for the environment. They’re not good for crime. And we’ve had enough.

JJ: Well, it sounds as though that community involvement relies a lot on information and on advance information. They have to know that this is in the planning process to know about the points that they could intervene, which is wonderful. But it also suggests, as I know the work does, that there could be interventions from a higher level, including from the federal level. What do you see as potentially useful that could happen there?

KS: Well, at the federal level, we would, of course, like to see stronger and more vigorous enforcement of the antitrust laws that we already have on the books. The Robinson-Patman Act, the Sherman Act are all laws that are there to prevent exactly what’s happening with dollar store proliferation. And states can also adopt those same laws at the state level to provide some protection there. And that may be, in some instances, easier than getting federal attention. 

States also are being pretty aggressive in looking at things like scanner errors, which you mentioned. In fact, the former attorney general of Ohio—well, first of all, the current attorney general of Ohio has investigated and fined Dollar General a million dollars for scanner violations. Basically, the price someone sees on the shelf is not the price they’re being charged by the scanner when they check out. The former attorney general of Ohio, a guy named Marc Dann, is now putting together a class action lawsuit against the dollar store chains for scanner errors, which he’s estimating Dollar General loan is making hundreds of millions of dollars annually in scanner errors because they’re so huge and they’re almost always in favor of the company and not the consumer. 

The adage is, “the best time to plant a tree is 10 years ago.” And often communities don’t think about protecting themselves from this sort of proliferation, this kind of predatory business expansion until it’s too late. But for those who are seeing this happening around them in other communities and thinking about it, it makes a lot of sense to put some protection in place right away. 

And some of the things that communities are doing are things like what we call dispersal ordinances, which basically say you cannot build a new dollar store within X distance, two miles, five miles of an existing store so that we don’t have the market crowded with them. Or they’re putting in place ordinances like just happened in a town in Oregon that I saw that has put in place a formula business ordinance saying we want to have retail diversity in the community. We don’t want to have 10 identical pizza places. We don’t want to have five identical grocery stores. We want to have diversity. So therefore, we are fine with one dollar store, but not with five.

JJ: Well, finally, information seems key to all of this—information of the actual impacts of dollar stores and then about the possible levers of potential resistance. And that brings me back to news media and reporting. The report itself on the dollar store invasion got coverage, absolutely. But of course, the implications go well beyond covering the report itself as an event. What would you like to see finally more of or less of from news media on this set of issues?

Kennedy Smith: “I would like to see more in-depth coverage of the impact of dollar stores once they’ve been in a community for a while…. I don’t see much looking back and saying, oh, yeah, we lost Ford’s grocery store and we lost the Haven grocery store, and these are the breadcrumbs that led to that outcome.”

KS: That’s a great question. I think I would like to see more in-depth coverage of the impact of dollar stores once they’ve been in a community for a while. I don’t see much on that. I don’t see much sort of looking back and saying, oh, yeah, we lost Ford’s grocery store and we lost the Haven grocery store, and these are the breadcrumbs that led to that outcome. 

I’d also like to see more news media tying this to threats to democracy, because if we have major corporations that are able to basically extract this kind of money, this vast volume of money from communities and make it difficult for independently owned businesses to compete, then we’ve changed what the nature of capitalism is. And we need to get back to the roots of what democracy is about. And that really is about having a level playing field for small businesses, for every American to basically have the opportunity to create a business enterprise and thrive and reinvest in their community. And that’s being taken away from us.

JJ: Well, we’ll end it there for now. Kennedy Smith is a senior researcher with the Independent Business Initiative at the Institute for Local Self-Reliance. You can find a lot of work on dollar stores, along with much else on their site, ILSR.org. Kennedy Smith thank you so much for joining us this week on CounterSpin.

KS: Thank you so much, Janine.

This post was originally published on FAIR.