How Dollar Stores Sell Low-Income People a Sense of Belonging

Loretta Brown’s local dollar store is about a seven- or eight-minute walk from her apartment complex in Upper Darby, Pennsylvania, a small suburb right outside of Philadelphia. “According to my husband, I’m there every day, but that’s not true,” she said with a laugh, explaining that the bulk of her purchases are household necessities.

“I love the dollar store,” she said.

As do most dollar store shoppers, according to at least one Morning Consult Brand Intelligence poll that recorded favorability ratings around 60 percent. Even as retail sales decline, the major dollar store brands — Dollar General, Dollar Tree, and Family Dollar (which was bought out by Dollar Tree in 2015 for $8.5 billion) — are experiencing rapid growth, with Dollar General and Dollar Tree adding upwards of 10,000 locations over the past decade and continued plans for expansion. The key to their success is a strategic focus on poverty: Deep discount retailers are uber-accessible to low-income consumers even when there’s a net negative economic benefit to shoppers and the community.

“The core of what dollar stores have done and really capitalized on is recognizing that there are people who really don’t have other options,” said Dr. Sriya Shrestha, who teaches at California State University Monterey Bay. Her work on the dollar store phenomenon, “Dollars to dimes: Disparity, uncertainty, and marketing to the poor at US dollar stores,” chronicles the dueling tensions of a capitalist entity that both aids and exploits the poor. “We know what dollar stores ultimately are: an attempt for a way for very wealthy people to capitalize on poverty.”

Women with families who earn under $40,000 per year dominate the dollar store model. They purchase only what they can afford to buy now, in smaller packages that often cost more per unit than they would at big box retailers. “Our customer doesn’t buy until she absolutely has to — she’s that stretched,” noted one Dollar General executive, according to Dr. Shrestha’s research.

Clearly, the dollar store fills a need. Stagnant wages have kept purchasing power flat over the past 40 years, wage inequality has grown to levels not seen since the Great Depression, and the richest five percent of Americans own two-thirds of the country’s wealth. As the New York Times reported a few years ago, retail is now split into factions: luxury items and deep discounts, with nothing in between. Where dollar stores succeed — Dollar General, Dollar Tree, Family Dollar, the 99 Cent Store, and local mom and pop shops that follow the same model — is in giving low-income consumers the American Dream for a dollar a day.

Dollar stores attempt to create a sense of abundance, filling their stores with thousands of products placed on shelves that are below eye level. According to Dr. Shrestha’s research, companies will also engage in “downward brand extensions,” developing less expensive brand-name products specifically for dollar stores. When a consumer can walk out of a store having purchased a multitude of brand-name products, it presents them with a positive shopping experience and adds to their self-worth.

“I used to be embarrassed about the dollar store,” said Loretta Brown, “especially when I first became disabled and lost my job and was unemployed for a minute.”

Brown is a 53-year-old  with an ongoing affinity for her childhood home in South Philadelphia, which she calls “that diverse part of the city that we love.” She’s married with three grown step-children, and while her husband works, she no longer does, and has relied on Social Security Disability for the past 10 years.Dollar stores attempt to create a sense of abundance

“My attitude has changed over the years,” she continued. “I’m not embarrassed. I don’t care… I’m making a smarter financial decision when I shop at the dollar store for whatever I get there.”

Feeding America, one of the nation’s largest hunger-relief organizations, co-authored a report with Proctor & Gamble showing more than one-third of families struggled to afford essential household goods. According to the findings, many families will skip out on personal care rituals or substitute products when possible, such as using hand soap as dish detergent. School supplies have become more costly, too, with the Huntington Backpack Index noting that parents can now expect to spend anywhere from $1,000 to $1,600 per child per year depending on their grade level.

“I used to shop sales and just use store discount cards, but as time has gone on, I’ve learned how to clip coupons,” said Kristine, a former social worker who owns her home with her husband. “I will buy hygiene products since they have full-size name-brand items… toothpaste, body wash, shampoo, some medicine,” she continued, “also, cleaning supplies and some food items.”

Though individual consumers can find shopping at dollar stores rewarding, the impact on communities can be more complex. The Institute for Local Self-Reliance, a nonprofit that works for sustainable community development, found that dollar stores contribute to the economic distress found in urban and rural communities. In 2018, the group put out a report finding dollar stores target low-income neighborhoods, especially Black neighborhoods, and drive out grocers and other healthy eating options. As a byproduct of these moves, local jobs have been eliminated as well.

Criticisms of the dollar store model have pushed local communities to fight back. Tulsa, Oklahoma, placed restrictions on the distance between dollar stores following a brief moratorium on new retail locations in 2017. Small towns in Kansas and Texas passed ordinances limiting the number of stores allowed within their limits.

But efforts to ban dollar stores and replace them with community-centric retailers have, at times, failed to gain traction. In Cleveland, for example, a local grocer received a $1 million subsidy to open up shop but, according to The Progressive, it struggled to find a customer base. Much of the nuance on this issue is lost in translation between reformers and the monied interests who stand to gain from tilting the conversation.

Moreover, as Dr. Shrestha said, in some ways, banning dollar stores misses the point.

“We need to make it so that people have the income so that they don’t have to rely on the dollar store for meeting their basic needs,” said Dr. Shrestha, explaining that wealth distribution, not market-based solutions, could help to eliminate poverty itself. “Eradicating the dollar store isn’t going to really solve that problem.”

Neither will a Whole Foods, Walmart, or local grocer that doesn’t meet the needs of low-income consumers in the here and now. Women-headed households are the primary consumers of deep discount retailers, according to Dr. Shrestha, and those households are disproportionately in poverty.

The real question she said is, “Are we okay with that?”

Originally published in Talk Poverty February 19, 2020