To a certain slightly uninformed expert, this Dollar General, in Faith, South Dakota would
seem an economic impossibility disproven only by its existence.
Faith is a tiny place—a remote, no-stoplight prairie town of 367.
It’s got a couple of gas stations and a couple of inns and a restaurant and an auto
part store, but what it doesn’t have is a single nationwide brand—it doesn’t have
a single branch of any store, restaurant, or service that exists beyond the region around
except for Dollar General.
But that doesn’t explain the full extent of the anomaly because Dollar General isn’t
just the only chain in Faith—it’s the only chain in a 45-minute radius until one
arrives at this Dairy Queen in the far larger 3,000 person tribal capital of Eagle Butte.
A 367-person population just isn’t typically enough to attract a nationwide brand—there’s
just not enough money in the area to make capturing it attractive—and yet somehow,
Dollar General makes it work.
While perhaps an extreme example, there’s no secret about Faith: it’s not some tourist
Mecca, it’s not an Interstate oasis, it does sit at the intersection between a state
and US highway, but it’s not on the fastest route between any two cities so this store,
somehow, is sustained by the tiny community that surrounds it.
This is anomalous in the context of national retailers, but not in the context of Dollar
General—they’re consistently persistent in places simply too small for other chains.
Its next nearest location to the north is in a town of 1,200; to the east, 1,100; and
to the south and west, 540 and 590, respectively.
Walmart is also one of the most regular retailers in rural America, but they don’t even come
close to these numbers.
There’s no way to know for sure which are their lowest traffic stores—and therefore
what the minimum population that can support their economics is—but by letting the quantity
of Google reviews act as an imperfect proxy, their location in Gunnison emerges as Colorado’s
least popular location.
6,700 live within a 20-minute driving radius of this store, but revenue is likely buoyed
by its positioning at the start of the dead-end highway up to the tourist town of Crested
Butte.
Similarly, Wyoming’s least popular Walmart is its outpost in Rawlings, with a 6,300 person
population within the same radius, but once again its revenue is likely boosted by its
location along Interstate 80.
So perhaps the best evidence of the minimum population to support the retailer’s economics
comes from Alaska, where its least popular store sits on the island of Kodiak—8,700
people live within a 20-minute radius, and there’s clearly no Interstate traffic coming
through.
Walmart revolutionized retail through its ability to turn a profit in small, remote
communities like Kodiak—its impact decimated the American Main Street—but Dollar General
has taken that to a new extreme.
Where Walmart entrenches itself in the thousands, Dollar General deals in the hundreds.
This revolutionary retail concept starts on the inside.
Total staff headcount at a given location typically sits between six and ten and, of
those, just two or three might work at a given time.
Given typical hourly rates and typical opening hours, that means Dollar General can spend
as little as $300 to $400 a day staffing their lowest-traffic stores.
Then there’s product offering complexity.
A Walmart averages 140,000 unique products—they’ll sell Coke in 10-count mini cans, 30-count
mini cans, 12-count full-size cans, 24-count full-size cans, 12-count mini bottles, 6-count
full-size bottles, 12-count full-size bottles, one-count two-liter bottles, 4-count four-liter
bottles; and then they’ll offer all these sizes for Diet Coke, Coke Zero, Cherry Coke;
and then they’ll offer this same spread for every other Soda brand and its variants,
which is incredibly convenient.
They have the exact soda, variant, bottle-size, type, and quantity that any given person wants,
but the permutations really add up.
More individual products require a more complex supply chain, more floor space, and added
staffing dedicated to organization which adds to cost for the retailer.
Dollar General, meanwhile, keeps it simple.
They offer just 10,000 unique products but they do this primarily not by reducing how
many product categories they sell, but rather the optionality within each category.
In a way, they’re trying to be a mini Walmart, offering a one-stop-shop experience, as long
as you’re willing to compromise on brand, size, quantity, or quality of a given product.
So whereas Walmart has a pan or toilet paper or detergent aisle, Dollar General has a pan,
a toilet paper, or a detergent.
Now, Walmart is likely able to purchase Tide detergent from Procter & Gamble for a fairly
low price because it's the largest retailer in the world and therefore has very strong
negotiating power—if it were to stop stocking Tide, P&G’s revenues would take an enormous
hit.
But correspondingly, given the popularity of Tide, Walmart could take a hit if consumers
decided to go to Target to buy the brand instead.
Dollar General, meanwhile, has that same enormous negotiating power with their same enormous
size, but crucially, they don’t have to stock everything.
Walmart’s competitive advantage is that they’re the definitive one-stop-shop—they
combine the local supermarket, hardware, electronics, home goods, and clothing stores into one.
Dollar General’s competitive advantage is that they’re the shop—they are the only
game in town and so they just need to offer one brand of laundry detergent and that’s
the detergent people will get.
This bestows enormous negotiating leverage—manufacturers will bend to their whims in order to become
the Dollar General detergent supplier, meaning they might be able to get a similar or even
better deal from P&G on detergent pricing than even Walmart.
That’s what leads to products like this: Dollar General’s $1 Tide-brand detergent.
To balance the retailer’s need for a low-cost offering with their desire to maintain a premium
name-brand image, Procter & Gamble has gone out of their way to manufacture a $1 Tide
detergent bottle.
Now, Walmart actually sells this same product for less.
Their 128 fluid ounce size works out to under 12 cents per load—almost half of Dollar
General’s 20 cents per—but Dollar General’s target consumer is one who is severely cash
strapped.
They cater to the class of consumers that might want to spend $10 on bulk detergent
that will last for months, but chooses the $1 option regardless to keep enough cash on
hand to pay rent before their next payday.
So Dollar General actually charges more per load, and even better, their customer will
come back sooner than Walmart’s to buy a refill—at which time they’ll also buy
whatever else they need, therefore extracting more revenue.
But Dollar General’s true strategic linchpin is the most anomalous aspect of its business
model: its remote locations.
The retailer has turned what would be a weakness for others into the core of its strength.
It starts with cost—rent at this store in North Creek, NY is $118,000 a year; at this
store in Sullivan, ME $103,000 a year; and at that Faith, South Dakota location $106,000
a year.
That works out to between $300 and $400 in rent per day which, added to their $300 or
$400 in daily staffing costs, underpins Dollar General’s ability to run a store with under
a thousand dollars of overhead per day.
In general, they just won’t set up a location in a place where they’ll have to pay over
$150,000 or so in annual rent—it just breaks their low-cost business model.
But low rent costs are far from the key that unlocks rural America—rather, remoteness
itself enables their remoteness.
Take their location in Haven, Kansas.
This is a town of 1,170 that simply does not have a grocery store.
They have a gas station and a liquor store and a coffee shop and diner, but they don’t
have a grocery store.
Dollar General is not a grocery store, but their locations do stock shelf-stable dry-goods
and frozen food, and some sell a limited supply of perishables.
The closest dedicated grocery store is a 10-minute drive away in the next town, and it’s small—not
one that could necessarily fulfill all of a person’s needs.
The closest supermarket is a full 22 minutes away in the city of Hutchinson, so what happens
in practice, when Dollar General enters a market like Haven, is that rather than making
that ten or twenty-two minute trip, people shop out of the local Dollar General for regular,
day to day needs, then make less frequent trips to the distant grocery store for fresh
and specialty items.
But increasingly this pattern isn’t confined to Dollar General, and it isn’t confined
to rural America, either.
This is Atlanta, Georgia and the surrounding cities, suburbs, and communities that comprise
much of the broader Atlanta metro area.
This is a map of their most common grocery stores: Whole Foods, Trader Joes, LIDL, Publix,
Kroger, and Walmart.
They all do the same thing, they all trend north and east.
But people live here, too.
And they too need food to eat and stores to buy food to eat.
For anyone, this would make grocery shopping more of a pain than it already is.
Making things more difficult though, this gap of grocery stores is also home to the
metro area’s least mobile, as these census tracts contain, in the words of the USDA’s
Food Access Atlas, more than 100 households with no access to a vehicle and are more than
1/2 mile from the nearest supermarket.
Unsurprisingly, this correlates closely with tracts that are low income as all these areas
have a poverty rate of over 20% or a median family income of less than 80% of the median
income for the state or metro area.
Put together, Atlanta residents with the least money and least mobility are the farthest
from supermarkets.
Now, of course it’s not a simple coincidence that some of the poorest and least mobile
populations of Atlanta are farthest from supermarkets.
These afterall, are areas still grappling with the legacy of redlining in the past,
and areas that some academics have identified as current instances of supermarket redlining—the
process by which the businesses intentionally keep their distance from such areas for reasons
that vary from crime rate and purchasing power to zoning restrictions and unfavorable street
layout.
But regardless of their reasons, supermarkets simply don’t exist in a large portion of
the Atlanta metro area, creating an urban food desert.
This is a void that dollar stores have stepped into.
Unlike Atlanta’s supermarkets, dollar stores trend south and west—largely, the areas
left behind.
And they provide an important service; they provide food stuffs and basic home supplies
at a low price point within walking distance or a manageable bus trip.
This has happened in Atlanta, it’s happened in Dallas, it’s happened in New Orleans,
and it’s happened in a host of other major and minor American cities from Tulsa to Dayton.
And in most of these urban cases, dollar stores effectively plug a hole that desperately needs
to be plugged.
It’s for this reason that after some teenagers burned down a dollar tree in the city of Dayton
in 2017 the community pleaded for it to be reopened.
It’s for this reason that the former New Orleans Mayor celebrated the proliferation
of Dollar Stores as the return of business investment in the city’s east end post-Katrina.
But plugging a hole is not solving a problem—it’s just an imperfect, temporary fix, not one
meant to last.
That’s because the impact of a dollar store in a food desert isn’t neutral to the health
of a community, it’s outright negative.
Most American food deserts aren’t so different from, of all places, Haven, Kansas.
They have a dollar store.
And they have, or until recently, had, at least one grocery store that carries shelf
stable foods along with fresh produce and refrigerated meats and dairy products—the
products that are lower-margin for the business, but lead to a more nutritious and diverse
diet.
Such stores have been harder and harder to come by, but many of America’s tiniest towns
have, against all odds, resisted the massive Albertsons and Kroger-fueled grocery-industry
consolidation—too small to be attractive for the supermarket chains—and are home
to some of the country’s last independent grocers, right-sized to fit the communities
they serve, barely hanging on as the brutal economics of America’s monopolistic food-supply
system push them over the edge.
But their perilous economics become all-but-impossible with the arrival of a neighboring dollar store.
In Haven, Kansas, this store was Foodliner, which, with the opening of the Dollar General,
saw its customer visits drop by nearly half, and after three years, saw its doors close
for good.
For any grocery store, it’s typical for sales to drop by up 30% when a dollar store
is opened nearby, as consumers head for canned soup, frosted flakes, pop tarts, and the countless
other shelf staples that are just a bit cheaper and a bit more convenient.
This kills the grocery store that counts on such sales to justify carrying fresh produce,
pushing them out of business.
This in turn, makes it more difficult to buy healthy, nutritious food, destroying the food
desert’s oasis, and putting people of modest means and mobility at a nutritional disadvantage.
And the impact of dollar stores on communities is broader than just what people eat.
In early 2019, the Dayton Daily News reported on plans for a new Dollar General on the east
side of town.
It’d be taking the place of a now closed grocery store, and it’d be the 70th dollar
store within the 10 mile radius of downtown Dayton, Ohio.
Like Atlanta, Dayton’s dollar stores map closely along its most disadvantaged and downtrodden
areas.
Where their density is the highest is where poverty rates are the highest, and where their
footprint is nearly zero is in the suburban communities of Kettering and Beavercreek where
household incomes are higher and grocery stores far more prevalent.
At the end of 2019, local news reported that there were 28 separate dollar store robberies
in the Dayton area—down from the highwater mark of 32 in 2017, but up from the 24 in
2018.
Effectively, dollar stores here have become a hotbed for crime.
Now in the case of Dayton, it’s not that dollar stores are to be blamed for the area’s
crime rate, but rather, that the design of the stores make them easy targets.
Principally, these businesses deal in cash—as not until 2004 did Dollar General even take
credit cards—making them ideal for a criminal of any level of experience.
Beyond cash, overflowing trash outside, cluttered aisles inside, full window advertisements,
light staffing, and outdated poorly placed cameras—all hallmarks of dollar stores—both
attract opportunistic burglary and make it difficult for police to safely navigate once
they arrive on scene.
In Dayton, the problem got to the point where the police received an average of nearly 1,000
calls to respond to dollar stores every year.
In response, the police began to proactively work with Family Dollar employees to establish
policies and management practices—from upkeep to more frequent cash transfers—that would
reduce vulnerability.
But the training just didn’t take, as employees turned over so frequently and cared so little
about their near minimum wage employer that they simply couldn’t be bothered.
Such high resignation, in both senses of the word, point to another long standing issue
only exacerbated by the arrival of dollar stores.
Along with further drying out food deserts and tempting crime, dollar stores provide
areas with only a few meager jobs.
The lean labor model may work for dollar stores’ profitability, but it doesn’t do much for
the surrounding community.
To keep labor costs low, a dollar store will only employ six to ten people and they’ll
only be paid around minimum wage.
Dollar General, for instance, pays 92% of its employees under $15 dollars an hour.
By themselves, these numbers are bad, but they get worse once considering the grocery
store that it might have replaced.
That independent grocer provides around twenty jobs; the dollar store, less than ten.
That independent grocer’s profits stay circulating within the local economy; dollar store profits
are whisked away to far-away investors.
With food, crime, and jobs, dollar stores aren’t the root of a problem that impacts
low income communities.
Nor are they the answer.
They’re a creative response to problems that take advantage of problems and then exacerbate
those problems.
But perhaps the most fool-proof evidence to articulate that dollar stores are just plain
bad for rural and urban America alike is the fact that the communities themselves are pushing
back against their advance.
In response to the lack of pay and the danger inherent in working at Dollar General, employees
in 2023 protested outside the company’s headquarters in Goodlettsville, Tennessee
for better working conditions.
In 2018, the city of Tulsa passed an ordinance to limit new dollar stores and instead encourage
full-service grocery stores.
In the move’s wake, 75 communities have blocked dollar store proposals and 54 cities
have enacted limits on dollar store development.
Of course, these numbers are minor in comparison to the tens of thousands of dollar stores
now spread across the US, but each case of grassroots pushback serves as a powerful rebuttal—that
these communities now marked by the neon signs signaling that the rest of the world has largely
forgotten about them are a problem, and enough of a problem to bring communities together
to fight back.
Fundamentally, Dollar General and its close equivalents are simply following the economic
path of least resistance.
They’re outcompeting local businesses, and they’re doing it fairly, but that path of
least resistance leaves a trail of destruction that disadvantages individuals.
That’s because individuals' best interests can work against their best interests.
People prefer having a dollar store and a grocery store and shopping at both, but in
the process of doing what they prefer in the short-term they destroy that grocery store
and create a scenario that is less desirable for themselves in the long term.
So that’s what government is for—it's an assembly of individuals into a collective
that can solve these strange mismatches between two sets of best interests.
The American main street is a fragile environment.
It’s already taken a beating as big-box retailers built up across the country, but
that battle was fought from a distance.
The one thing Walmart couldn’t compete with was the locational convenience of small town
stores for small towns.
Dollar General can, and it is.
It’s got a simple yet unbeatable business model—it’s a black hole that sucks up
variety and vitality, and litters the American landscape with these perfectly destructive
beige boxes.
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