Dollar Stores Curbing Sales, Jobs at Independent Grocers

New published research affirms the ripple effect of discount and dollar stores in local markets, especially rural areas. According to a study in the journal Applied Economic Perspectives and Policy, the entry of a dollar store in these communities is linked to a 5.7% decrease in sales at independent grocery stores.

Rigoberto Lopez, professor of agricultural and resource economics in at the University of Connecticut’s College of Agriculture, Health and Natural Resources, shared other findings of his team’s research into the dollar store effect. For example, data points to one out of every 20 independent grocery stores going out of business within a few years of a dollar store coming to town. 

[Read more: “Dollar General Continues Investing in Rural Communities”]

Independents are more vulnerable than larger retail chains. In the paper, the searchers noted that “in contrast to chasing stores, independent grocery retailers are more likely to adjust prices as they are not limited by unfirming pricing across markets … this pricing pattern could be a contributing factor to the larger sales effects observed for independent grocery retailers.”

The proliferation of dollar stores also impacts local employment. As the paper affirms, these kinds of stores don’t have as many associates and, as a result, there is an average 3.7% dip in employment when dollar stores open in a community. 

“If two or three dollar stores come in, over time, this result will be magnified,” Lopez said in a recent interview with UConn today, the university’s communications platform. 

In their conclusion, the researchers also emphasized the impact on public health in rural areas, given that dollar stores tend to have fewer fresh foods than independent grocery stores. Lopez and his colleagues are continuing to study the literal grocery landscape, with plans to explore the impact of club stores and e-commerce.