Dollar Store Doom Loop
The dollar store economy is a failed economy.
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In my recent piece on how to save local retail, I mentioned taking action to rein in the power of the two dominant dollar store corporations: Dollar General and Dollar Tree, the latter of which also owns Family Dollar.
But I want to drill down on the subject a bit more, because I saw this news item: North Little Rock, Arkansas, is giving Dollar General a 65 percent, 30-year rake off on its property taxes to build a new distribution center (which is right next to an Amazon fulfillment center, because of course it is). This is exactly the sort of thing local residents should be up in arms about: A destructive national chain that harms local retailers is being given a leg up by the local government for no good reason at all.
I pretty consistently complain about states and cities helping national chains with their distribution and warehousing buildout because it disadvantages the smaller, local retailers who don’t have their distribution supported by public dollars, but are doing that work on their own out of garages, storage units, and pickup trucks. Whether it’s Amazon or chain restaurants, local businesses are explicitly forced to subsidize their national competition, and in the case of Amazon then pay to ride the publicly-subsidized rails Amazon set up to reach customers.
On that note, Dollar Tree has received $105.8 million in public subsidies, while Dollar General has received $32.5 million. The loss of those funds is bad enough, but dollar stores also have a uniquely pernicious effect on local economies. They drive out local retailers, particularly grocers, and especially in poorer neighborhoods and rural areas by flooding those parts of the country with stores. Dollar chains are collectively opening three stores every day; 40 percent of the store-opening announcements in the first half of last year were for dollar stores.
Here’s one story of how a local grocer in Kansas closed after a dollar store opened in town that had some of its utility costs paid for by the public. And even if dollar stores aren’t explicitly driving out grocers in an area — they make a lot of noise about building in so-called “food deserts” — their entrance makes it far less likely a real grocer will bother to enter a market. In fact, the Arkansas handout I cited at the beginning is being justified by lawmakers, in part, because the dollar store wants to build freezers in which to store fresh food — in effect asking the public to subsidize dollar stores as the solution to the very problem they cause.
But the main way dollar stores drive out local retail is by selling cheaper stuff, which has an appeal to shoppers in these specifically targeted neighborhoods and counties. Those “low” prices, though, are only possible through the chains’ negligence regarding the safety or health of their employees or consumers, and the poverty wages and shoddy benefits they provide.
This ProPublica piece is the defining one on how dollar chains do not care at all about safety in their stores, refusing to take basic steps to prevent robberies or other harms to workers and shoppers alike, but there are plenty of others. And dollar stores employ fewer people on average than do local retailers, which means fewer dollars circulating in the local community.
So while on the surface, the cheaper goods can be a benefit to local residents, the long-term costs are borne in the form of worse and fewer jobs, less tax revenue, fewer shopping options, and local money being siphoned away into corporate coffers somewhere else. And all that poverty merely makes the community even more liable to be left with nothing but dollar stores in the future.
As Erica Smith, a congressional candidate in North Carolina, put it:
Consolidation has also played a role in this dollar-store induced doom loop. As other retail chains, such as big box stores and large grocers, have concentrated and pulled out of poorer and rural areas (and those two often overlap of course) the void has been filled by dollar stores, which themselves were allowed to consolidate when Dollar Tree was allowed to purchase Family Dollar in 2015, bringing the number of major players in the sector from three down to two. And, as I’ve said before, like good monopolists, they intend to raise prices when their takeover is complete.
To steal a turn of phrase from my colleague JD Scholten, the dollar store economy is a failed economy, one in which neither workers nor shoppers nor local communities ultimately come out ahead. And this didn’t all come about due to the inexorable pull of some economic force that no one could withstand. Policy choices were made at all levels of government to allow dollar chains to take over and profit off some of the poorest places in the country — which means government can do something about it.
There’s no silver bullet or one-simple-step plan to address this, but by using zoning to limit the number of dollar stores that can be in a particular place, raising minimum wage and benefit standards, creating and enforcing stronger labor protections, promoting unionization, cutting subsidies to chain retail stores, getting more money into the hands of local shoppers, and promoting local retail options, lawmakers can work to turn their local economies back from the dollar store brink.
UPDATE I: I’m going to be doing a larger preview of this year’s state legislative sessions in the next week or two, but I wanted to flag that three states — New York, Florida, and Illinois — have bills to ban non-disclosure agreements in economic development deals, those insidious secrecy agreements I complain about all the time. Sen. Roberts Peters and Rep. Will Guzzardi introduced Illinois’ last week, which is called the Honesty in Economic Development Act. If you happen to be an Illinois resident, drop them a line and tell them what a good idea it is. Every bit of support helps.
UPDATE II: Thanks to Mark Scheer at the Investigative Post, we now know how much New York State offered Samsung in subsidies for the semiconductor plant that wound up in Taylor, Texas: $1.9 billion. This really sums up New York’s approach to economic development: It spent tens of millions of public dollars on a corporate campus in Western New York, the sole resident of which is being paid $4 million in taxpayer funds per job created, and literally billions of dollars can’t lure to the site the semiconductor corporation that lawmakers have been chasing all along. The whole thing should be an embarrassment to New Yorkers.
UPDATE III: Remember that Utah tech CEO who admitted to receiving $10 million from the state in order to prevent a relocation he had no intention of making? His exact comments were previously undisclosed, but now the state has finished its “investigation” into what he said, and released them:
"I don't understand why the state gave me over $10 million to stay in Utah. I just it's incomprehensible. I was never going to leave, but I got $10 million from the state of Utah to stay," James said. "And I'll take it. Everyone else is taking it, I'll take it. But I'll give it back if we can get rid of that law and stop paying people from outside the state to hire my employees or take away employees I want to hire. I just don't understand that part of the budget."
Somehow, the state’s “investigation” concluded that this does not constitute fraudulently applying for and receiving taxpayer funds, which is just … guys, c’mon.
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— Pat Garofalo
I am a retired Teacher (with service of 35+ years), I am a life member of AAUP, but while working, my institute did not allowed us to join any labor Union to get good benefits like monthly pension after retirement. I appreciate my monthly income from SSI. I do my shopping from Dollar stores This store has three prices, $1.25, $3, and $5 per item. I am thankful to this store as they sale most items for $1.25 which is way below the surrounding super markets prices. I feel that this store is helping out fixed income retired people by fair savings. I don't go to store who uses Dollar name but they have all kind of prices like any regular store. If, our government is helping my dollar store then I don't mind it. Thanks. We fixed income people don't ask for any free food assistant from local government. Don't make food too expensive that we can only eat half of our meal. In many countries Government provides cheap food to avoid unrest, what is wrong if Dollar store sells cheaper than big super markets! Other day one small grocery store Clark in Iselin, NJ was telling me that their store was fined $100 because they were selling milk gallon cheaper than set minimum price by Government!