You’re not going to drive very far on a rural highway in Mississippi without seeing a Dollar General store.
The no-frills, low-price stores with the yellow-and-black logo are sprouting up all over the state and the nation — so fast that some towns and counties are enacting moratoriums on new locations.
The backlash has developed into one of the latest manifestations of protectionism — an effort, almost always eventually fruitless, to stifle the forces of competition on which this nation’s free-market system is based.
Dollar General has become the behemoth in the dollar store sector, with more stores than its two closest competitors — Family Dollar and Dollar Tree — combined.
Dollar General has been on an astonishing growth trajectory in terms of both locations and profits.
Since 2008, it has more than doubled its locations to more than 19,000 today. It opens about three new stores a day. Greenwood’s Mike Rozier Construction Co. has built a bunch of them, close to 500 in all.
Profits have exploded even more from less than $110 million in 2008 to $2.4 billion last year. That’s a 15-fold increase even after adjusting for inflation.
Headquartered in Goodlettsville, Tennessee, Dollar General’s winning strategy has been to put stores where most no one else will, including sparsely populated rural outposts that have been drying up for decades. Dollar General isn’t going to win any architecture awards, but by keeping its development and operating costs low and its prices even lower, the company makes an estimated 20% return on every new store it opens, according to Stephan Bisaha, a public broadcasting journalist who has reported extensively on the rapid expansion of dollar stores, especially in the South.
On a per capita basis, the region leads the nation in the concentration of dollar stores with 1.5 locations per 10,000 residents. Mississippi’s rate is double the Southern average and the highest in the country — a reflection of both its high poverty rate and its heavily rural nature.
Those who defend dollar stores say they are providing consumers what they want: low prices on canned goods, cleaning supplies and other staples plus convenience. Those who oppose them say they are hurting small towns by driving mom-and-pop stores, especially small grocers, out of business.
But it’s not only the mom-and-pops that are worried about Dollar General. The nation’s largest retailer may be, too.
Panola County, located about an hour’s drive from Greenwood, is contemplating a ban on new dollar and convenience stores in its unincorporated areas. The county of 33,000 people already has 19 dollar stores in all, including 11 Dollar General locations.
According to the Batesville newspaper, those in favor of a moratorium are largely concerned about preserving businesses that are locally owned and have been part of the community for generations.
But Panola County’s top business recruiter, Joe Azar, also said Dollar General is taking a bite out of the town’s Walmart Supercenter by strategically locating its stores to grab customers before they get to the retail giant’s big-box location.
“That would be horrible for us to lose our Walmart, and we are definitely putting our Walmart in jeopardy,” Azar was quoted as saying. “I don’t think there is room for any more Dollar Generals in our county, but I said that four Dollar Generals ago.”
Don’t shed any tears for Walmart, though. Forty and 50 years ago, the shoe was on the other foot. The Bentonville, Arkansas-based retailer was expanding dramatically into small towns and cities, putting out of business home-owned stores that couldn’t match Walmart’s variety or, more significantly, its purchasing power and hard-nosed negotiating tactics. Merchant after merchant moaned that Walmart’s retail prices were less than what they could buy the same products at wholesale. Downtown storefronts emptied, some of them never to recover. Later, when Walmart entered the grocery sector, many independent and smaller chain grocers folded as well.
Some towns, seeing what happened elsewhere, tried to protect their hometown merchants by not permitting a Walmart. The retailer responded by building the store outside the city limits and taking its sizable sales tax revenue with it. Before long, most municipalities caved.
Protectionism simply doesn’t work, or it doesn’t work for long. Either the business outsmarts the protectionists, or consumers rebel over their shopping options being artificially limited.
The best that governments can do, when balancing the interests of legacy businesses and chain operators, is not play favorites by giving tax incentives and other breaks to one that the other doesn’t receive. That really does stack the deck.
Competition can be disruptive, but it’s inevitable. There’s always will be people who think they can build a better mousetrap.
It’s also usually beneficial for consumers, either in the form of lower prices or better service, and sometimes both.
But for competition to work as designed, everyone has to play by the same rules.
- Contact Tim Kalich at 662-581-7243 or tkalich@gwcommonwealth.com.
