Last updated on July 29th, 2024
Independent grocery stores have long been a staple of rural America. However, according to a new study by the USDA’s Economic Research Service (ERS), the rise of dollar stores poses a threat to these independent grocers.
Economists from ERS, North Dakota State University and the University of Connecticut recently investigated the implications of the growth of dollar stores for more traditional, independent grocery stores using proprietary data from the National Establishment Time Series (NETS) database and the ERS Rural-Urban Commuting Area (RUCA) Codes.
In 2015, independent grocers represented about half of the food retailers in 44 percent of U.S. counties. The study examined data from 2000-19, focusing on what happened to independent grocery stores when a new dollar store opened in the same area.
The report found that:
- Increased Closure Rates: The likelihood of an independent grocer shutting down rose by an average of 2.3 percent when a dollar store entered the market.
- Job Losses: Employment at independent grocers dropped by an average of 3.7 percent after a dollar store opened nearby.
- Sales Slump: Independent grocery stores saw a 5.7 percent decline in sales on average when faced with dollar store competition.
Rural disadvantage
The study also revealed a disparity between rural and urban areas. While dollar stores impacted both locations, the effects were far harsher in rural communities:
- Closures Tripled: Independent grocers in rural areas were three times more likely to close after a dollar store opened compared to urban areas.
- Job Losses More Severe: Rural grocery stores experienced a 2.5 times greater decline in employment compared to urban counterparts.
- Sales Hit Harder: Rural independent grocers saw sales decline nearly twice as much as urban stores when facing dollar store competition.
Long-term impact
The study further suggests that the negative effects of dollar stores on rural independent grocers may be long-lasting. Unlike urban areas, where independent grocers might eventually return after a dollar store’s initial impact, rural communities may see a permanent loss of these grocery options.
This raises concerns about access to healthy food in rural areas. Dollar stores typically offer a limited selection of food, often focusing on pre-packaged and processed options. If independent grocers with wider food selections disappear, rural residents could face challenges in finding fresh and healthy options.
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The study highlights the potential negative consequences of the dollar store boom, particularly for rural communities. Additional research is needed to understand the long-term implications for food access and overall health in these areas.
