MOVILLE, Iowa — A fire destroyed their local grocery store in 2008, but people in this Woodbury County town of 1,600 pooled their money to rebuild.
Now the town is again in danger of losing the store it worked to keep. The owner said a third of his sales dried up when a new competitor, Dollar General, came to town, and the grocery might not survive.
The dollar store chain, with its towering shelves of inexpensive household goods and packaged foods, is shaking up the retail marketplace in small towns like Moville across Nebraska and Iowa as it expands into places too small to show up on other retailers’ radars.
Many shoppers embrace the newcomer, saying it brings competition, new products and variety at prices they can afford.
“I was glad to see it come in,” said Connie Schultzen, shopping for eggs and vinegar at the Moville Dollar General. “It’s actually a lifeline.”
Others worry about what it will do to the local store, Chet’s Foods. If Chet’s closes, they’d have to make the 40-mile round trip to Sioux City to find the selection of fresh meat, dairy, produce and other grocery items that Chet’s offers.
“We’re so lucky to have this store, I don’t ever want to lose it,” said Jeannie Crick, buying milk and lettuce at Chet’s. But like others who support Chet’s, Crick said she’s shopped at Dollar General, too.
Store owner Chet Davis says people don’t realize how precarious the grocery store’s business is, how tight grocery store profit margins are or how most of his costs — such as utilities and insurance — stay the same no matter how many packs of steaks or stalks of broccoli he sells.
Davis, a longtime grocer, negotiated a rent reduction earlier this year with the community development group that townspeople funded to reopen a store. The group leases the space to him.
To compete, he added a dollar section at his store and cut back employee hours. Now he’s asking for a second rent reduction. He said he would be willing to pay more if sales were to rebound.
Dollar General is reaching some of the smallest towns in the rural Midwest. It is capturing consumers who otherwise might trek to an out-of-town Walmart to buy life’s basics, like dish soap, holiday decorations and Doritos. Dollar General describes itself as a “small-box” store, compared with the “big box” that is Walmart.
The company looks to build where it can offer customers an easy and convenient place to shop, spokeswoman Crystal Ghassemi said. Most shoppers are coming from within a 3- to 5-mile radius, or about a 10-minute drive.
“Meeting customers’ needs is Dollar General’s top priority,” she said.
After years of holding steady with 80 stores in Nebraska, Dollar General went on a building spree starting in 2014, adding about 10 stores a year in the state. By early 2017 it had 111 Nebraska stores. More are under construction and in the pipeline. Iowa grew from 178 to 205 Dollar General stores in the same years.
The publicly traded Tennessee corporation, with $22 billion in sales, now has more than 14,000 U.S. locations — about as many as McDonald’s — and it’s growing: Nationwide, Dollar General said it’s opening about 1,285 stores this year.
Its stock is up 75 percent in the past five years, shy of the 87 percent gains in the broader market over the same period, but far outpacing some more challenged bricks-and-mortar retail chains. Macy’s, for instance, cratered more than 50 percent in the past five years; even Walmart’s stock is up only 25 percent.
Interest from Dollar General has taken some towns by surprise. Expansion is something that other categories of bricks-and-mortar retailers can’t do right now, said Mike Paglia, analyst at Kantar Retail in Boston.
“These guys can because they’re small stores — there’s more room for them,” he said. The typical new Dollar General store is 7,300 square feet and employs just six to 10 workers. Wages advertised in the Moville store started at $8 an hour for sales clerks and $10.50 an hour for assistant store managers.
The chain reports strong foot traffic and growing same-store sales as customers, many with low or fixed incomes, respond to its main selling points of value and convenience, Paglia said.
More than 80 percent of the items it sells cost $5 or less. The company says its customers are some of the first to be hit by an economic downturn, and some of the last to recover.
The new stores are popping up in some very small Nebraska towns. They’re in Yutan and Humphrey, Wilber and Crawford, each with a population under 2,000. These are towns even smaller than those served by Shopko Hometown stores, a format aimed at rural communities. Shopko is the discount retailer that bought the former Omaha-based retailer Pamida’s locations.
Often the only competitors in these towns are gas station convenience stores and local, independent grocery stores.
Dollar General’s main dollar-store competitor, Dollar Tree, which acquired Family Dollar in 2015, also is expanding. Dollar Tree has added about 10 stores in the past few years for a total of 58 in Nebraska. Those are mostly in medium and larger cities, not in small towns.
It’s in some of these small Nebraska and Iowa towns, where people usually cheer new businesses, that Dollar General is not getting a warm reception from everyone.
“You’ve got to understand how small of a retail environment 900 people is,” said Tim Thramer, owner of Thramer’s Food Center grocery store in Blue Hill, Nebraska, a Webster County stop halfway between Red Cloud and Hastings.
Because new retailers are rare here, the mayor’s first thought was, “Oh, good,” when a developer for Dollar General approached the City Council last summer about annexing and rezoning some land.
“A retail chain is growing and wants to come in — that speaks volumes for our town,” said Blue Hill Mayor Keri Schunk. Soon she thought twice.
Thramer protested the Dollar General at City Council meetings in September 2016. So did the owner of a coffee shop in Blue Hill, the Hastings Tribune reported. So did the manager of the local telephone service cooperative, who said the dollar store could force other businesses — his customers — to close.
Schunk said she and the City Council spoke with store owners and leaders in neighboring communities where the dollar store already had locations. They heard that some existing retailers felt an impact, although in some cases the business rebounded.
Others whom Schunk polled told her it would be a benefit to Blue Hill to keep more people shopping locally rather than having to drive to Hastings to buy household goods.
Ultimately, she said, there was nothing the city could have done to stop the store from opening.
Dollar General opened in Blue Hill in April, and Schunk said it’s too soon to say what impact it’s had on sales tax revenue. The typical Dollar General store generates about $1.6 million in sales a year, although not all those sales are taxable.
Dollar General’s biggest sales category by far is “consumables,” which include grocery items that generally aren’t taxed in Nebraska.
Thramer, the grocer, said the competition has had a negative impact on his business, though he declined to detail the sales hit.
One Kansas State University expert who studies rural grocery stores said the stores can suffer up to a 30 percent loss of sales when a Dollar General opens — as was Chet Davis’ experience in Moville.
Associated Wholesale Grocers, the Kansas City, Kansas-based supplier that sells to independent stores such as Chet’s and Thramer’s, said that in a very small town like Blue Hill or Moville, with just one supermarket and one dollar store, the supermarket might typically have 70 percent market share and the dollar store 30 percent.
AWG says it offers low-priced store brands such as Always Save, along with the savings that come with its large purchasing power, to help its member stores compete. Its locally owned member stores “also have an established image of great fresh products and services that aren’t found in the dollar stores,” AWG said.
You might be able to buy a carton of milk or a frozen pizza at Dollar General, for instance, but you can’t get a fresh pineapple or T-bone steak like you can at Chet’s Foods, where Chet Davis will personally carry your groceries to your car.
The market share loss is hurting some stores. Thramer, 60, has cut back on advertising and community donations to keep his Blue Hill operation profitable. He thinks the store will close when he retires.
“I believe this business I’ve got here is virtually unsellable,” he said.
Dollar stores are a major concern, said Kathy Siefken, executive director of the Nebraska Grocery Industry Association.
“No one talks about it, but I’m telling you, it is going to be devastating to rural Nebraska,” she said. She didn’t know of a town whose grocery store went out of business that solely blamed Dollar General for the closing. Rather, she said, the competition is just “one more nail in the coffin” for struggling rural groceries.
Competition from chains, especially Dollar General, is the No. 1 concern for rural grocery stores, according to David Procter, the Kansas State University professor, who reviewed several surveys of store owners.
Saving money on groceries is a powerful force for consumers, Procter said. But he said consumers should also think long term about their investment in a community. Locally owned grocery stores tend to employ more people, sell more fresh meats and produce, and circulate more revenue back into the community than a dollar store, Procter said. And having a grocery store protects property values, he said, because the town becomes a more attractive place to live.
If a store closes, “You’re not losing 10 cents or 50 cents on a can of soup, you’re losing thousands of dollars on the value of your house,” he said.
Dollar General says it, too, contributes. The Dollar General Literacy Foundation has awarded $140 million in grants since 1993 to nonprofit organizations in markets the store serves.
The shoppers in Chet Davis’ aisles say they value his store.
“The staff here are great, they offer full service,” said Ron Butler, shopping with his wife, Deb Butler. Still, he said, “competition is good.”
Davis says he doesn’t mind competition. “But Dollar General, we can’t compete with Dollar General,” which can buy packaged food at great scale, he said. Chet’s sells a 5-ounce can of Starkist tuna fish packed in water for $1.39. Dollar General sells it for $1.
For shoppers like the Butlers, those 39 cents are enough to send them down the road to Dollar General.