A New Challenge for Dollar Stores

The Wall Street Journal reports that local governments across the country are placing zoning limits on discount stores and requiring them to set aside space for fresh food.

They point to the 73111 ZIP code in northeast Oklahoma City (which covers 9 square miles), where there isn’t a single grocery store and 32% of the 11,000 residents live below the poverty level—roughly three times the national average.

But there are four dollar stores in the ZIP code, and the City Council is scheduled to hold a public hearing on a plan requiring retailers in the area to designate at least 500 square feet of space to fresh food. 

Dollar stores, of which there are now about 30,000 throughout the U.S., carry everything from greeting cards to household supplies and sell food which is often packaged or frozen, as well as foods such as chips and canned soups. 

Forcing dollar stores to change is one tactic local governments around the country are using to address the lack of access to fresh fruit, vegetables and meat in “food deserts,” according to the Journal.

But there are huge challenges here and one that the local governments just don’t get.

First of all, dollar stores have been built on the concept of opportunistic buying. Bottom line is that the products that are sold in the store have been bought by the chain at a deep discount as they may have been discontinued; have new packaging or a new recipe or ingredients; or are nearing an expiration date. That’s why shoppers can purchase them for a dollar, or at least substantially cheaper. These chains’ infrastructures haven't been built around stocking the same items 365 days a year. What the local council members don’t get is this is merchandizing and product assortment is not in the DNA of dollar stores, and in my opinion, it won’t succeed. 

Nor is their store format. The key to a successful dollar store is the impulse or adventure of finding some unexpected products that typically is on a display in the front of the store. There are not traditional shelves or refrigerated cases.

Last month, Dollar General said 650 locations will sell produce, representing 4.1% of the company’s 16,000 stores. Let’s see how that works out.