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Dollar Stores Adversely Impact Rural Independent Groceries

05/13/2024

A cooperative study by the USDA Economic Research Service and economists affiliated to North Dakota State University and the University of Connecticut have recently published on the effect of dollar stores on independent groceries*.  The study covered the years 2000 to 2019 and considered both urban and rural locations. 

 

It was demonstrated that when a dollar store opened in an area, existing independent grocery retailers were 2.3 percent more likely to exit the market.  Employment in these stores decreased by 3.7 percent and total sales by 5.7 percent on average.  The impact was however more pronounced in rural areas. Following the establishment of a dollar store, independent groceries were 5.0 percent more likely to cease operation, and employment was reduced by 7.1 percent and sales by 9.2 percent.  The negative effect in rural areas was approximately twice that of urban locations. The report noted that independent groceries were generally unlikely to reestablish operations given the presence of dollar stores. 

 

Because dollar stores carry a limited range of foods compared to independent groceries, their introduction into rural areas may affect nutrition based on limitation of selection especially in items regarded as “healthy foods” including eggs, dairy and produce.

 

 

*Lopez, R. et al Dollar Store expansion and independent grocery retailer contraction, Applied Economic Perspectives and Policy (2023) doi.org/10.1002/aepp.13398