USDA ERS – Access to dollar stores affects rural grocery stores more than urban areas

Independent supermarkets, or grocers whose owners operate fewer than four stores, make up a large portion of the rural U.S. food retail landscape. In 2015, they represented about half of food retailers in 44 percent of U.S. counties. However, heading into 2015, dollar stores became increasingly visible in rural counties, where they had the second-highest growth behind supercenters among food retailers between 1990 and 2015, according to research from the USDA, Economic Research Service (ERS). Economists from ERS, North Dakota State University, and the University of Connecticut recently examined the implications of dollar store growth for more traditional, independent grocery stores using proprietary data from the National Establishment Time Series (NETS) database and the ERS Rural- Urban database. Commuter Codes (RUCA).

NETS provides geographic, employment, and sales information for each year a facility is open to all sectors of the U.S. economy. The researchers focused on dollar stores and independent supermarkets and combined this data with the ERS RUCA codes’ measures of population density, urbanization, and daily commuting to classify census tracts; in this study, all non-metropolitan core or commuter areas were classified as rural.

The researchers examined what happened to the number of independent grocery stores and the employment and sales statistics of these stores between 2000 and 2019, when a new dollar store opened in the same rural or urban census tract. The results showed that when a dollar store opened according to a census, independent grocery stores were, on average, 2.3 percent more likely to exit the market. Employment at independent supermarkets fell by approximately 3.7 percent and sales fell by 5.7 percent.

However, there were significant differences between the impact of dollar stores on independent supermarkets in urban and rural census tracts. For example, the odds that an independent grocery store would leave a rural census tract after a new dollar store opened was five percent, about three times greater than in urban census tracts. Similarly, the decline in employment in rural areas was about 2.5 times greater than in urban areas, and the decline in sales was almost double in the rural census tracts.

Furthermore, the researchers found that these effects diminished in urban census tracts about five years after dollar store entry, but that the effects persisted in rural census tracts. This could limit shopping options in rural areas in the longer term. Dollar stores generally have a more limited selection of food products, with more of an emphasis on pre-packaged and processed foods. If independent grocers are less likely to return to rural communities after entering the dollar store, this could lead to a more limited selection of food products available in these areas and affect consumers’ access to healthy foods.