Dollar Store Expansion and Independent Grocery Retailer Contraction
New AAEA member research released in the AEPP
Across the U.S., there is anxiety among communities and advocates as the rapid spread of dollar stores leads to the closure of local businesses and brings with them unhealthy food choices, a particular problem in low-income areas with little or no alternative food outlets. New research finds that they expedite the closure of independent grocery stores, reducing their sales and employment, but much more so in rural America. Although a significant volume of criticism of dollar stores has been generated in urban and suburban communities, the results do not suggest significant entry impacts in urban census tracts. The research suggests that a more complex explanation, including anxiety over the rapid structural transformation of the grocery retail landscape as well as ideological and political factors, be developed to better inform policymakers and advocates.
In the new article “Dollar Store Expansion and Independent Grocery Retailer Contraction,” released in the Applied Economic Perspectives & Policy, Rigoberto Lopez from the University of Connecticut, Keenan Marchesi from the USDA, Economic Research Service, and Sandro Steinbach from North Dakota State University look into the rapid expansion of dollar stores and its impact on independent grocery stores.
The authors say, “We found two main impacts. First, we found that the entry of dollar stores significantly and negatively impacts sales and employment of independent grocery stores and significantly increases the likelihood that these stores go out of business. Still, these effects differ greatly across the U.S. Second, we found that the impact of dollar stores on independent grocery stores is about three times greater in rural areas than in urban areas. Their entry, sales, and employment impact in rural America are persistent, while in urban areas eventually disappear.
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