business news in context, analysis with attitude

From the New York Times this morning:

"Since 2019, at least 75 communities have voted down proposed dollar stores, while roughly 50 have enacted moratoriums or other broad limits on dollar store development, according to a new report by the Institute for Local Self-Reliance, an organization that is critical of corporate retailers and their impact on communities.

"By comparison, from 2015 to 2018, about 25 communities voted down proposed dollar stores while only six enacted moratoriums or ordinances limiting their growth.

Although the number of blocked stores is much smaller than the thousands that Dollar General and similar chains have opened in recent years, the movement against the industry has created an unusual group of allies. On many other issues, they disagree, but they are united in their fight against dollar stores.

"Rural, Republican-leaning communities in places like southern Virginia and North Carolina are pushing back against dollar stores … And leaders in cities like Toledo, Ohio, and Birmingham, Ala., have also mounted opposition, saying the stores are fueling crime and unhealthy food choices. Across Georgia, 18 cities and towns have restricted dollar store development, according to the think tank’s report."

There also is a sense in some of these communities that employees are being exploited by dollar store management.  "The stores typically operate with lean staffing, and their employees, by some measures, are paid at the bottom of the retail industry’s scale. According to a survey by the Economic Policy Institute, a liberal think tank, 92 percent of Dollar General workers earn less than $15 an hour, lower than many other companies surveyed, including Burger King, Walmart and Dunkin’. About 20 percent of Dollar General workers earn less than $10 an hour.

"At the same time, the company is highly profitable. In December, Dollar General said its quarterly operating profit had increased about 10 percent from a year earlier while net sales had increased 11 percent, to $9.5 billion. Dollar Tree, which also owns the Family Dollar chain, is posting strong results as well. On Wednesday, Dollar Tree said its profit in fiscal year 2022 increased 23 percent to $2.2 billion and net sales rose 7.6 percent to $28.3 billion."

KC's View:

The fact is that dollar stores are in an enormous growth phase - in 2021 and 2022, more than a third of all store openings in the US were by dollar stores. The Times writes that "Dollar General alone opened 2,060 locations during those years, far more than any other retailer, according to Coresight Research, and the company now operates 19,000, more than twice as many as Walmart and Target combined."

Another reality in the current economic environment - inflation is a significant problem, and people have a recessionary mindset even if the country is not in a recession - is that dollar stores in a lot of ways are becoming the benchmark against which more traditional retailers are having to measure themselves in the marketplace.  

One of the ways that retailers need to do this is to stress value, not price - they're not the same thing.  Sure, they have to be as sharp on price as possible, and have to make sure that they give customers strategic wins whenever possible, but they also need to emphasize that sometimes cheap food is not the best value.  And, they have to point to the local folks they employ and the higher wages they pay as contributing back to the community.  I'd be putting these folks front and center of my marketing efforts, and getting aggressive about smacking around the dollar store companies as being bad for their employees, bad for their customers, and bad for the communities they serve.

Of course, there are a lot of communities where dollar stores are the only option, and so this suggestion is irrelevant.  And I suspect there are some places out there facing Hobson's choice.