Dollar stores take a bigger bite out of rural market share

Independent grocery stores in rural areas take a bigger financial hit than their urban counterparts when dollar stores move into the area, according to a new report from the U.S. Department of Agriculture’s Economic Research Service (ERS).

Based on data from 2000 to 2019, researchers found that sales, employment, and store count all drop in rural communities at a much higher rate than in urban communities when dollar stores enter the market.

The entry of dollar stores results in an average decline of 9.2% in sales for independent grocers in rural areas, nearly double the 4.7% decline in urban areas. Employment declines by 7.1% in rural areas versus 2.8% in urban areas, and store count drops an average of 5% in rural areas compared to 2.3% in urban areas, according to the report. 

The study by ERS, North Dakota State University, and the University of Connecticut is based on data from the National Establishment Time Series (ETS) database and ERS Rural-Urban Commuting Area Codes. 

“In addition, the researchers found that in urban census tracts, these impacts waned after about five years following a dollar store’s entry, but the effects continued in rural census tracts,” the report noted. “This could reduce grocery store options in rural areas for the longer term.”

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