The prevalence of dollar stores in small towns is well-documented. Natchitoches, with a population of only 17,165 according to the Census Bureau, has a total of three Dollar Generals, two Family Dollars and one Dollar Tree. Why do these stores seem to pop up everywhere? How do they sell items at such a low price? Evidence shows that the cheap items offered at these stores come at a greater cost: they sell low-quality goods at inflated prices, they overwork employees and they harm local economies.
These stores use dubious strategies to turn a profit. As the value of the U.S. dollar declines, the only way to turn a profit when selling products at $1.25 is to offer goods that are basically worthless. Let’s take a look at food products offered at Dollar General. 15,000 of Dollar General’s 20,000 stores offer no fresh produce, only pre-packaged goods, according to an article on the company website.
Many of these packaged foods are recognizable name brands, like Yoplait and Campbell’s, but the prices are higher for less product. For example, a 20-ounce bag of Nature’s Own honey wheat bread is $3.65 at Dollar General and $2.84 at Walmart. Almost every name brand food item is found cheaper at another store.
Sometimes, items at a dollar store are priced the same as another grocer, but the item has less volume. This particular strategy is called “shrinkflation,” where companies try to turn more profit by shrinking the size of items rather than directly increasing the price tag.
According to Fortune, “The phenomenon of ‘shrinkflation’ arose during the pandemic as retailers grappled with surging costs and experimented with pricing power. To avoid raising costs, stores are cutting the size and quality of their products.”
At Family Dollar, $1 can buy you 14 ounces of mustard. At Walmart, $0.98 can buy you 20 ounces of mustard.
According to former Dollar General employee Anna Beth Scales, “Name brand stuff is always more expensive at the dollar store, but if you get the generic dollar store brand it is actual crap. It expires sooner, goes stale quicker, all of that.”
Walmart is the most obvious competitor when it comes to comparing dollar store prices. But you may wonder, what about other grocers in Natchitoches, like Super 1 Foods? Evidence indicates that the prevalence of dollar stores in rural areas is forcing local grocers to hike up their prices and, in many cases, close up shop.
According to the United States Department of Agriculture Economic Research Service, dollar stores opening up in rural areas made independent grocers more likely to have less sales, less employment and to exit the market entirely.
The study explains, “Results showed that when a dollar store opened in a census tract independent grocery retailers were 2.3 percent more likely, on average, to exit the market. Employment at independent grocery stores fell about 3.7 percent, and sales declined by 5.7 percent.”
Since most dollar stores do not carry fresh produce, the forceful closing of local grocery stores contributes to food deserts around the nation. Driving out smaller grocers makes it extremely difficult for Americans living in rural areas to access proper nutrition.
The USDA explains, “Low-income communities in the United States lack stores that sell healthy and affordable food. The lack of store access in these communities—sometimes called food deserts—may contribute to poor diet, obesity, and other diet-related illness.”
Dollar stores run on minimalism: spending as little money as possible and providing customers an illusion of affordability. Another aspect of this is poor employee management. Dollar stores often hire as few people as possible and schedule their employees sparsely.
“It was dire,” Scales said. “It remained understaffed always despite continuous complaints to the manager, she made it out like it was impossible … They are barely ever willing to staff more than two people at a time, and one person has to always stay in the front. And when you are constantly having to go to the front to help with the line, it’s impossible to keep things stocked.”
The Dollar General website claims that their goal is to “make shopping hassle-free and affordable with more than 20,000 convenient, easy-to-shop stores.” The company is one of the most successful in the nation, with quadruple the amount of stores that Walmart has (5,206).
However, dollar stores’ insidious shrinkflation tactics harm consumers and the local economy. The poor management at dollar stores also leads to stressed employees and a negative shopping experience. Natchitoches is one of many small towns that is being overtaken by these stores. As consumers, we should be aware of where our money is going.
