Cities Push Back Against Dollar Stores In Food Deserts

Is the growth of bargain stores harmful to communities?

For dollar stores, there has been no retail apocalypse: The concept has been growing by leaps and bounds, especially in the years since the recession. Late last year, Dollar General Corp., the largest of the dollar chains, said it was adding almost 1,000 stores in 2019.

Dollar General and Dollar Tree, which also operates Family Dollar, now have about 30,000 stores between them nationwide, and have been called the "true disrupters" in retail.

As dollar stores have moved into some urban areas, particularly lower-income neighborhoods, they have started to inspire strong criticism that their presence is driving smaller grocery stores out of business, either making a food desert worse or even creating one. Now, a number of cities are looking to stifle their growth.

"While dollar stores sometimes fill a need in cash-strapped communities, growing evidence suggests these stores are not merely a byproduct of economic distress. They’re a cause of it," the Institute for Local Self-Reliance, an advocacy group and sharp critic of the industry, asserts in a white paper. "In small towns and urban neighborhoods alike, dollar stores are triggering the closure of grocery stores."

Naturally, dollar stores deny that characterization of their impact.

"We believe our small-box footprint and product assortment provides customers with both alternative and complementary options to larger-box grocers and other retailers," Dollar General spokeswoman Crystal Ghassemi said. "We also believe the addition of each new Dollar General store represents positive economic growth for the communities we serve."

Nevertheless, the idea that dollar stores are driving local grocers out has inspired new policies, especially over the last two years. 

Tulsa, Oklahoma, enacted a zoning overlay last year that limits new dollar stores and encourages full-service grocery stores in the part of the city known as north Tulsa. The policy bans new dollar stores from locating within 1 mile of any existing dollar store in north Tulsa.

The city defines dollar stores as retailers with a floor area less than 12K SF that offer for sale a combination and variety of convenience shopping goods, and continuously offer a majority of the items for less than $10/item.

Any store that dedicates at least 500 SF to the sale of fresh meat, fruits or vegetables is exempt from the 1-mile dispersal standard. There are also incentives for standard grocery stores to locate in the area, such as a reduced parking requirement.

"The purpose of the zoning overlay was to address the proliferation of dollar stores," said Tulsa City Council member Vanessa Hall-Harper, who represents north Tulsa. "They were contributing to food deserts. Groceries stores close after dollar stores move in."

The same dynamic is at play in low-income rural and urban neighborhoods, Hall-Harper said, where dollar stores started focusing expansion efforts in recent years, especially in the wake of the recession.

"I'm not against dollar stores, but they need to be limited in some communities," Hall-Harper said. "There would be even more dollar stores in my community now if the city hadn't passed the zoning overlay."

Hall-Harper said she has gotten calls from all over the country about what Tulsa has done to limit the growth of dollar stores.

"There's a lot of interest from local officials and citizens who are concerned about the impact of dollar stores," she said.

Other places have taken similar steps, though the rules vary some in detail. In early 2016, the Unified Government of Wyandotte County [Kansas] Commission passed an ordinance regulating dollar stores, which was updated in 2019. Wyandotte County includes Kansas City, Kansas. 

The ordinance requires a special use permit for new "small box variety stores," establishing a requirement that new development be a minimum distance of 10,000 feet from existing stores. The law defines a small box variety store as a store of 15K SF or less which sells an assortment of physical goods, products or merchandise for $5 or less.

In mid-2018, the Mesquite, Texas, City Council passed an ordinance that prohibits dollar stores from locating within 5,000 feet of one another, as well as requiring them to obtain a conditional use permit to open. Mesquite is a suburb of Dallas.

"We considered a moratorium," Mesquite City Manager Cliff Keheley told Fox 4. "But the council was able to come together very quickly and put together rules and regulations which addressed their concerns."

Also in 2018, the City Planning Commission of New Orleans completed a study on the impact of dollar stores, recommending a number of policies, including regulations designed to limit the number of dollar stores in certain areas, but also to incentivize stores than offer fresh food and loosening zoning to allow more urban agriculture.

In 2019, the Oklahoma City City Council passed a 180-day moratorium on constructing or issuing building permits for small-box discount or convenience stores within one mile of another such store in part of the city. 

When the moratorium is over, the next step is to create what the city is calling a Healthy Neighborhood Overlay District, ideally to attract a grocery store with fresh meat and produce to the city’s northeast side, the Journal Record reports.

The Birmingham, Alabama, City Council also voted this year to establish a "healthy food overlay district," which prevents new "small box discount stores" from opening within 1 mile of existing stores.

"Lots of research has demonstrated that dollar stores actually contribute to a loss of grocery stores over time,” Birmingham Director of Innovation and Economic Development Josh Carpenter told Birmingham Watch.

Food deserts, which plague both rural and urban communities whose common tie is elevated poverty rates, have been defined by the U. S. Department of Agriculture as low-income census tracts in which a substantial number or proportion of the population has low access to supermarkets or large grocery stores. 

Food deserts also lack fresh fruit, vegetables and other healthy whole foods, and a significant number (at least 500 people) or share (at least 33%) of the population is greater than half a mile from the nearest supermarket, supercenter or large grocery store. For households without automobiles, in areas without transit, that can make food shopping nearly impossible.

Kansas State University Professor of Communication Studies David Procter, who is director of the Rural Grocery Initiative at the university, said there isn't a definite answer to whether dollar stores make food deserts worse.  

"Our work is in rural parts of Kansas," Procter said. "We know that dollar stores take significant business from rural grocery stores. Some grocery stores have closed because of dollar stores, and that leaves communities with less healthy food — both variety and quantity of healthy foods.”

If a town has a grocery store and a dollar store moves in and the store closes, the residents of that area have less choice and will have to look to other sources of some foods, Procter said.

Still, dollar stores do offer some healthy foods, although it is limited in its variety and quantity, Procter said. Also, there are some rural communities where a grocery store has not existed for some time. 

"Then a dollar store moves in, and residents are elated about having some food and dry goods available," Procter said.

Dollar General's Ghassemi said that the company offers fresh fruits and vegetables in about 450 stores with plans to expand those offerings to 200 additional stores in fiscal 2019.  

"We also unveiled our Better For You merchandising set in mid-2018 in response to customer requests for healthier options in our traditional stores," Ghassemi said.

That includes about 125 items and is available in about 3,400 stores with plans to add it to 6,000 stores by the end of this year.

Dollar General strives to provide such products as milk, eggs, bread, cheese, frozen and canned fruits and vegetables, cereals, rice and pasta, Ghassemi said. 

"We plan to continue to evaluate the expansion of such initiatives, taking into account our strategic, financial, format and distribution requirements," Ghassemi said.