(The Center Square) – With online shopping and the ongoing coronavirus pandemic, “brick-and-mortar” stores in Illinois are struggling to survive, but dollar stores continue to be a success story.
Dollar Tree, Family Dollar and Dollar General continue to expand, especially in rural areas. Dollar General was the top chain for new locations in 2019, and 75 percent of its outlets were in towns with a population under 20-thousand. It has grown to over 16,000 outlets last year with 135,000 employees. There are 89 Illinois cities that are home to Dollar General outlets.
Dr. Chris Merrett from the Institute for Rural Affairs at Western Illinois University in Macomb, calls it a “counter-intuitive business model”, especially for Dollar General, with 42 percent located in rural areas.
“We were very worried about the retail apocalypse, right?” Merrett said. “Malls closing, big box stores closing, and yet despite all of those closures, Dollar General has continued to grow.”
Even in poor rural areas, a Dollar General moving in can be a mixed blessing. Sometimes they are filling a vacuum left by other stores closing up shop, but sometimes they drive longtime locally owned markets out of business.
“Especially when you think about how some of the “mom-and-pop” grocery stores are often decades old,” said Merrett. “Grocery stores already have very narrow profit margins.”
Merrett said the stores can sometimes fill “food deserts”, but with the lack of fresh food like meat and produce, the selection has been called a “food swamp.” Dollar General reportedly is planning to offer fresh food at some of its outlets.
The expiration of the higher federal benefit last month and delays tied to its replacement pose a challenge for the companies. But in an article from the Wall Street Journal, executives from both Dollar General and Dollar Tree said they are preparing to serve shoppers who are looking for deals and lower-priced merchandise during a period of economic weakness.
“We can see that we’re getting a trade-down at a pretty good clip,” Dollar General Chief Executive Todd Vasos said on a call about quarterly results. “As we continue to watch this evolve, what we see is very reminiscent of what we saw during the Great Recession.”
Such stores could help restore downtown shopping districts by occupying empty storefronts, but they could also threaten the “business ecosystem” as Merrett noted, by locating on the outskirts of town, drawing shoppers away.
Merrett said Dollar General appears to be following the Walmart model of retail, wringing out the last dollars of a community, then leaving town when the market expires. Walmart is closing down its oldest and least efficient stores, as they did in Clinton in 2018.
“There is a limited amount of wealth in rural areas and they are going to extract it to the extent that they can and then when it is no longer viable, they just close the store down,” Merrett said.