Food Shopping at Dollar Stores: The Changing Face of Food Retail, and What It Means for Consumers
Dollar stores are the fastest-growing food retailers in the contiguous United States and have doubled their share in rural areas in the past decade. Though dollar stores still represent a small share of households’ total food purchases on average, they play an increasingly prominent — and controversial — role for many Americans. This C-FARE webinar will present current evidence on what the growth of dollar stores means for the food we eat, consumer experiences, and the changing nature of food retail in communities across America.
Our discussion included Dr. Wenhui Feng (Dept. of Public Health and Community Medicine, Tufts University), Dr. Lauren Chenarides (Morrison School of Agribusiness, Arizona State University), and Dr. Sara John (Center for Science in the Public Interest). It was moderated by C-FARE Board Member Dr. Jane Kolodinsky (Dept. of Community Development and Applied Economics and Center for Rural Studies, University of Vermont) and co-hosted by Sean Cash (Friedman School of Nutrition Science and Policy and former C-FARE Board Member).
Dr. Wenhui Feng (Dept. of Public Health and Community Medicine, Tufts University) -- The Healthfulness of Foods Purchased at Dollar Stores, 2008-2020
Dollar stores tend to carry foods that are lower in nutrients and higher in calories and have less fresh produce. The healthfulness of overall purchases at the household level is less discussed in the literature.
Dr. Feng's research has been focused on three questions: How many household food purchases were made at dollar stores? How healthful were the foods purchased in dollar stores? And what sociodemographic characteristics were associated with higher dollar -store food purchases? Her team relied on the IRI Consumer Network, representative of the contiguous United States, which provides a detailed account of their retail food purchases at the item level. They also used the USDA Purchase-to-Plate Crosswalk (Health Eating Index), ranking purchases from 0 to 100, with 100 being the most aligned with dietary guidelines.
From 2008 to 2020, retail food purchases at grocery stores decreased from 62.3% to 55.1%. Conversely, retail food purchases at dollar stores increased from 3.4% to 6.5% during that same period. In other words, retail purchases at dollar stores have doubled over this period. The Health Eating Index also suggests that foods purchased in dollar stores are less healthy. Among all store formats, dollar stores ranked at the bottom in terms of healthfulness of foods purchased there. Dollar stores had acceptable saturated fats, refined grains, and sodium levels but less acceptable for fruits and vegetables, dairy, and protein products.
After comparing the HEI between purchasers at dollar stores with that of the general population, Dr. Feng’s team found that the overall household among dollar store shoppers was almost the same overall HEI of the general population, even though the food purchased in dollar stores were less healthy. Thus, the researchers concluded that dollar store purchasers might compensate for the lower nutritional quality of dollar store food by compensating and buying healthful food in other store formats.
As income increased, the share of household dollar store expenditure decreased. When stratifying on race, ethnicity, geographic area, and income, it was found that non-Hispanic Black households had the highest share of household dollar store expenditure. Additionally, households in small towns, low commuting, and rural areas had higher food purchases in dollar stores. Non-Hispanic Black households in these areas spent over 10% of their budget in local dollar stores. To summarize the data, households with more purchases in dollar stores are likelier to have lower income, be headed by non-Hispanic Black individuals, and live in rural, small-town areas in the South.
Retail food purchases have been changing in the past decade. There is a lot of concern about dollar stores, given their less healthy food offerings. However, things may not be as dismal as they look: consumers may compensate in other store formats. There may be an opportunity for intervention by bringing more healthful options to dollar stores. Decision makers may want to consider the equity implications of the rise of dollar stores.
Dr. Lauren Chenarides (Morrison School of Agribusiness, Arizona State University) -- Dollar Store Expansion and Policy Insights
The food industry is one of the most heavily regulated industries in the world. The more concentrated a market becomes, the more market power firms can exercise. Unfortunately, greater firm-level market power is often associated with higher barriers to entry and other anti-competitive outcomes (e.g., higher consumer prices).
Dollar stores significantly outnumber the leading national chain food retailers. Dollar stores capture only a tiny share of the grocery market. However, the percentage of sales from grocery items is growing fastest within dollar stores, compared to other retail formats.
Dollar stores appear to be filling a gap in the food system. Dr. Chenarides’ research combined public and private data sources to characterize areas, across time, as low-income low, access (LILA) tracts (i.e., “food deserts”), examine correlations between dollar store expansion and food access, provide insights into whether dollar stores fill a gap in areas where traditional retailers do not enter and perhaps may not be profitable. She found that dollar store exit rates were lower in LILA block groups than non-LILA groups, concluding that there is enough demand for dollar stores but not for traditional food retailers. After a dollar store enters, a LILA block group is likelier to remain LILA.
Dr. Chenarides also found that dollar stores are crowding out incumbent food retailers. Wanting to estimate the cost of entry for retailers of various formats to examine the impact of dollar store expansion on firm-level revenue, Dr. Chenarides focused on urban markets in Texas to simulate how expansion (growth in density of dollar stores) would change costs of entry for other retailers. She considered: supercenters, large grocery stores, small grocery stores, convenience stores, and superettes. Regional large-format retailers would increase density in response to dollar store expansion, while superettes would plateau. The latter result suggested some saturation point at which market power could be shared. Finally, the density of small-format stores would fall as dollar stores expanded.
The demand for dollar stores is sufficient for operability in markets where traditional food retailers do not enter. Also, there is evidence that dollar stores and large-format stores capture different market segments. In urban markets, where both dollar stores and traditional retailers are present, dollar stores would market share away from other small-format retailers.
Dr. Sara John (Center for Science in the Public Interest) -- Dollar store perceptions, shopping behaviors, and opportunities for healthy retail: A national survey of shoppers with low incomes
Thirty municipalities have implemented ordinances restricting the increase of dollar stores. However, few have researched limiting dollar stores, and not enough about community impressions. Policy recommendations need to be community-centered. Dr. Sara John created a survey for 750 recipients based on a focus group of frequent dollar store shoppers and SNAP recipients to understand the role of dollar stores and community perceptions of dollar stores.
Dollar stores play a major role for shoppers with limited resources. There is frequent food shopping at dollar stores, but it is not the main food source for most. For some groups, dollar stores were an important source of food. Most frequent dollar -store food purchasers and SNAP recipients visited supermarkets and big box stores. The second most frequent store format was dollar stores. Amongst dollar store shoppers, 25-35% shop weekly for food. About one-third got 50% of their food from dollar stores. Additionally, dollar stores played a more important role in parents, younger shoppers, food insecure shoppers, and SNAP participants.
Overall, community perceptions of dollar stores were positive and seen as helpful to the community. The factors that contributed to favorably viewing dollar stores were value and convenience. Those with a positive view of dollar stores spoke of the small size of dollar stores, the fewer other shoppers, and the quick convenience of shopping in a dollar store. Negative opinions spoke of concerns about poor management, crime, and issues with cleanliness. Of the participants, 85% viewed dollar stores as helpful to the community; only eight out of the 750 participants saw dollar stores as being harmful. One participant mentioned that for people with large families, dollar sores were the easiest way to feed their loved ones.
When asked what community-supported opportunities to create healthier dollar stores existed, participants supported adding healthy options. There was broad support, 70% and higher, across the different types of shoppers for stocking more healthy options. There was less support, 30 to 40%, for stocking fewer healthy options.
Policy solutions may be implemented at the local and federal levels. For example, at the local level, governments could pass dollar store density ordinances to increase healthy food options by mandating a certain amount of floor or shelf space for healthy items. There may also be an opportunity to improve healthier purchases by increasing nutritional marketing via more nutritional checkout policies. In addition, Congress and agencies could pilot SNAP incentive expansion to dollar stores at the federal level. They could also base SNAP authorization on increased healthy food options and product placement.
This program is supported in part by the Agricultural and Applied Economics Association and the US Department of Agriculture’s Economic Research Service, and the National Agricultural Statistics Service.
Those who register but cannot attend our webinar can always view a recording of it later at the council’s YouTube channel.