The Problem With Dollar Stores - Public Goods Blog

The Problem With Dollar Stores

When it comes to getting groceries, dollar stores and discount outlets throughout the nation are becoming a hub for frugal and low-income communities.

one dollar bill

In 2017 it was reported that in the U.S. 40 million people were at or under the poverty line. Dollar stores flourish from the circumstance that their main customer base is comprised of those who qualify under federal poverty guidelines.

Garrick Brown, Director of Retail Research at Cushman & Wakefield, told Bloomberg, “Essentially what the dollar stores are betting on in a large way is that we are going to have a permanent underclass in America.”

In impoverished areas, access to affordable healthy produce and products is absent. By the U.S. Department of Agriculture [USDA] standards, this environment is the definition of a food desert.

According to the Institute for Local Self-Reliance [ILSR], the number of dollar stores throughout the U.S outnumbers the sum of all Walmarts and McDonald’s within the entire nation. Dollar General, a preponderate player in the world of discount retailers, is intending to open about 975 new locations this year, concentrating on lower-income inner cities and rural towns.

The influx of discounted retailers often puts mom and pop shops out of business, due to the inability to compete with the competitive pricing. When discount retailers set up shop in these areas, what appears to be a saving grace can turn out to be detrimental for the community.

Local, independent stores are often the last source of anything healthy within the surrounding area. Lack of grocery stores, farmers’ markets and healthy food providers are what create the food deserts the discount stores thrive in.

Walking down the food aisle at the dollar store, the closest item to fresh produce typically comes in the form of frozen bags, cans and jars filled with preservatives such as sodium. The Food and Drug Administration [FDA] states that the more than 70% of sodium that makes up the average American’s diet comes from consuming packaged and prepared foods.

Even though companies such as Dollar Tree have been trying to implement healthier options that fall within their price point, it is worth questioning the origins of the fluctuating options discount stores may offer.

Justin Shank, who has worked in the food industry for nearly a decade, elucidated how dollar stores and discount retailers typically source their food.

“Dollar stores and discounters are ‘last resorts’ for manufacturers”

“Dollar stores and discounters are ‘last resorts’ for manufacturers,” Shank said.

The reason dollar stores can sell their items — even name brand items — so cheaply is because of the source of their inventory. According to Shank, manufacturers grade harvested crops by their size, color, sugar content and blemishes. Typically name brand grocery stores will sell produce categorized as ‘A’ grade.

Regardless of the final evaluation of any produce, the same amount of money goes into creating the entire crop. This dynamic is why various mainstream companies try to find other profitable uses for their non ‘A’ grade commodities to lessen the blow to their profit margins.

Fruits and vegetables that fall into the ‘B’ or even ‘C’ ranking are frequently repurposed into juices or are promoted as ingredients “perfect for smoothies.” Some companies even rely on the revenue generated from the sale of their unwanted products to discount retailers.

“The produce you find at discount retailers are typically ‘B’ or ‘C’ grade product,” Shank said.

Shops like dollar stores buy cheaply-made products and rejected produce because it is inexpensive and profitable. By purchasing unwanted produce from manufacturers at a discounted price, dollar stores can then alter their purchase into separate, smaller quantities.

Commonly, grocery vendors expect a three-to-six-month shelf life for ambient or frozen food. To avoid this dilemma, manufacturers will sell their cast-off products to discount stores that agree to take “one-time deals.” Items that are discontinued, nearing expiration or have quality issues make up to one half of the inventory found at markdown retailers.

Food that was overstocked or had inventory or distribution problems from the packing facility make up the other half. The plethora of processed, frozen and shelf-stable foods are essentially byproducts from the production of premium goods.

“Dollar stores don’t get any kind of premium or healthy offerings and you never know what they will actually have stocked,” Shank said.

Consumers may save money at dollar stores. The average quality of the goods is so low, however, that the discount prices might not be worth the health risks.

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Comments (10)

  • The fact that produce may be less than perfect and blemish-free does not mean it is necessarily less tasty or nutritious. Frozen food frequently is a better quality than more expensive fresh options.

  • Hi,
    It’s an Interesting viewpoint. Is there a value to using simpler words, such as “explains” vs Elucidates so you reach a wider audience? Who is the target audience? What are the actions a reader can take that will help? Are you suggesting that the capital investments made into dollar stores are contributing to the lo income situation? Or are they filling a need? What causes poverty? Why are some people able to rise above and generate enormous wealth for the people around them ? What makes some individuals so special that they generate wealth, vs stuck in poverty.

  • Please cite your evidence. Having been a supplier to multiple dollar store and “C-store” (c for convenience) chains, for 10+ years, I can tell you that you’re skipping out on some truths, and glossing over others entirely. I don’t know why, because there’s absolutely no reason to, besides a bias and/or lack of knowledge.

    1) dollar stores don’t get “cast offs”, when it comes to food and produce. That’s a misleading way of labeling fruits and vegetables that aren’t beautiful to look at, but are perfectly good to eat. Are the colors of the dried peppers a little bit yellow? Yes, but that doesn’t make them inedible, nor less nutritious, or spicy.

    2) frozen produce are picked at the peak of freshness, and flash frozen to preserve maximum nutrition. If you do your research, and lab testing, you’ll find that they contain more nutrition, and for longer, than many fresh produce that are picked early to accommodate packing transport times. By discouraging people from buying frozen produce, you’re doing them a disfavor. Especially, those who live on tight budgets.

    3) dollar stores serve an important function in our food ecosystem in reducing food waste. The US throws away around 150,000 tons of food on an annual basis. If stores were willing to sell produce that doesn’t look perfect, what you refer to as “B” and “C” grade items (incorrect grading system, by the way), and look past arbitrary expiration dates (excluding dairy and other highly perishable items), we’d be throwing away much less. Food items that are sold to a C-store often don’t expire for a year, if their expiration dates are fast approaching, they most often have signs on them. C-stores take these items, and sell them at a lower cost. Otherwise, manufacturers just dump perfectly good food into the landfill.

    4) when a manufacturer goes through a rebrand, or made a mistake on a label, it doesn’t mean the food inside automatically becomes bad. Just like the ugly produce, these products just now look different. As a consumer, that’s a score for us. We get the exact same thing, but at a lower price, simply because the manufacturer’s logo is now red and white instead of purple and yellow.

    4) are there products that are made specifically for c-stores? Yes, of course, but most of them are the same products you see in grocery stores, but a smaller size, a non-mainstream brand, or a private label brand. If the product is labeled as 100% honey, you can be sure that it’s 100% honey. If it’s not, it can be reported as consumer fraud.

    In other words, do your research and interview people who’ve actually worked in the industry before mass blasting misinformation based on what you think might be true. I hold Public Goods to a higher standard than what this post has shown me.

    • Hi,

      Thank you for the feedback! I just forwarded your comments to the author of the post and asked her to do more research and possibly revise.

    • Come on now, the benefit of bashing Dollar Stores (and there like) is so people will be persuaded to buy their groceries and cleaning products at Public Goods.

  • Outstanding publication. Have yet to try the products but this is a very interesting newsletter.

  • Another huge problem with dollar stores is the amount of flimsy plastic junk they sell! For instance, visually appealing colorful toys that get a couple uses before they break and are tossed into landfills. It is pretty sickening.

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