Opinion: Dollar Stores Are A Problem In St. Louis

In the 70s we didn’t have dollar stores, we had the five and dime.

Long before the days of big-box stores like Walmart and Target, these five-and-dime stores had everything you needed. You could buy clothes, grab some treats, and eat lunch for under $20. These iconic American stores dotted Main Streets across the country before the big guys came around and put them out of business. (MeTV)

In my hometown of Oklahoma City my favorite five & dime was TG&Y (1935-2001), I’d also ride my bike to the larger Woolco — “It was a full-line discount department store unlike the five-and-dime Woolworth stores which operated at the time. At its peak, Woolco had hundreds of stores in the US, as well as in Canada and the United Kingdom. “  After closing, the space became a Venture, a retail chain based in the St. Louis suburb of O’Fallon MO.  Of discount department stores I’ve preferred Target for decades.

Walmart, in the early years, brought the discount department store to small towns all over America. Eventually they’d build a larger store in the same town. Main Street businesses began to close. Then Walmart began closing stores, forcing customers to drive a town or two over to shop at an even larger store.

And now Amazon is hurting all brick & mortar retail, right?

Not exactly.

Many investors believe the popular narrative that Amazon is crushing brick-and-mortar retailers. The e-commerce titan certainly humbled plenty of them, but some retailers continue to expand by opening new stores.

The top three dollar-store chains in America, for example, opened more than 1,800 stores last year. Dollar General (NYSE: DG) led the pack, followed by Dollar Tree (NASDAQ: DLTR) and its subsidiary, Family Dollar.

In 2018, Dollar General plans to open 900 new stores. Dollar Tree plans to open 350 more namesake locations and 300 new Family Dollar sites and re-banner 50 Family Dollar locations as Dollar Tree stores. All three chains posted positive comparable-store sales growth in their latest quarters. (Motley Fool/USA Today)

How did we get here? From 2014:

Wal-Mart Stores (WMT, +2.19%) executives could not have been too happy to wake up to the news this morning that dollar store dominator Dollar General (DG, -0.17%) offered $9.7 billion in an all-cash deal to buy out its smaller, struggling rival Family Dollar Stores (FDO, +0.00%), outdoing an earlier, accepted cash-stock offer by Dollar Tree (DLTR, +0.20%).

Dollar General is by all accounts a supremely well run retailer: it has reported 24 straight years of same-store sales growth, all the while managing a massive expansion in recent years that has won it millions of shoppers looking to save money. Moreover, its operating profit margin has also improved in the last five years despite the costs of opening thousands of new stores.

That management prowess could turn Family Dollar into a far more formidable rival than it has been on the watch of CEO Howard Levine, whose father founded the chain in 1959. Family Dollar has expanded quickly but also has run into trouble in the last two years by misreading its customers and ramping up its offering of pricier items such as beauty products. It has since backtracked, ramping up its inexpensive offerings. (Fortune)

However, it was Dollar Tree that prevailed, buying Family Dollar in 2015.

From November 2018:

Dollar Tree acquired Family Dollar in 2015, after undergoing a bidding war with Dollar General, its main US rival. Dollar Tree and Dollar General are almost neck-and-neck in terms of store count and annual sales. Both dollar chains have about 14,000 to 15,000 locations. Dollar Tree generated $22 billion in sales in 2017 compared with $23.5 billion at Dollar General. (Business Insider)

First, how many of these stores are in the St. Louis region?  I checked all three within a radius of my zip code just North of downtown, 63106.

• Family Dollar has 50 stores within 10 miles, still just 50 within 25 miles.
• Dollar Tree has 18 within 10 miles, a total of 59 stores within 25 miles,
• Dollar General has 28 within 10 miles, a total of 69 stores within 20 miles (they didn’t have a 25 mile option)

Added up, I’ve got 96 dollar stores within 10 miles. That’s a lot! Food is a big part of their business.

They technically aren’t even grocery businesses, but dollar stores are feeding more people than one of the highest-profile supermarket chains in America.

The finding, in a new report by the Institute for Local Self-Reliance, is a testament to dollar stores’ growing dominance of the American retail landscape.

Grocery sales at the two biggest dollar brands, Dollar Tree and Dollar General, approached $24 billion this year, compared with roughly $15 billion at Whole Foods, according to private market data from the research firm Chain Store Guide.

The ILSR is using the numbers to highlight the threat to independent businesses posed by low-end retail monopolies. (Huffington Post)

Ok, Whole Foods is a niche player in the U.S. grocery segment. Still, what are people eating from dollar stores? Certainly not organic kale. Even ALDI has a nice selection of organic products and lots of fresh produce.

Yesterday I checked out the Groceries, Food & Beverages section of the Family Dollar website.

Give your family delicious, healthy, nutritious meals for less. At Family Dollar our discount food and grocery items include the name-brand products you need to cook great meals at home or enjoy a snack on the go.

At the bottom of the page was the following:

Your local Family Dollar has all the same food and beverages you’ll find at grocery and big-box stores – but here, you can buy them all for less. Our shelves are stocked with delicious ingredients for meals and great snacks from the brands you know and trust. From Hormel, Betty Crocker, and Kellogg’s to Frito-Lay, Wise, and Hunts, you’ll find great discount groceries for everyone in your family. Best of all, we even have frozen and refrigerated foods, like potpies from Banquet, pizza from Red Baron, and fresh milk and eggs.  

Yes, the food items found at dollar stores can be found at grocery stores — but so much at grocery stores can’t be found at dollar stores. The biggest category is fresh produce.

Many are researching the problem of the growth of dollar stores:

This follows two decades in which Walmart’s super-charged growth left small-town retail in shambles. By building massive, oversized supercenters in larger towns, Walmart found it could attract customers from a wide radius. Smaller towns in the vicinity often suffered the brunt of its impact as their Main Street retailers weakened and, in many cases, closed.

Today the dollar chains are capitalizing on these conditions, much like an invasive species advancing on a compromised ecosystem.

Local grocers that survived Walmart are now falling to Dollar General. “This has become the number one challenge of grocery stores,” says David Procter, an expert on community development and director of the Rural Grocery Initiative at Kansas State University. (Institute for Local Self-Reliance)

Much of the above link focuses on predominately-black North Tulsa, here’s another quote:

In late August, just a few days before Labor Day, the City Council finally took up Hall-Harper’s proposed dollar store moratorium. Residents of North Tulsa filled the chambers and one by one spoke in favor of the measure — a show of support that Hall-Harper says made all the difference. The moratorium passed by a 5-to-4 vote. It suspended the permitting of new “small-box discount stores” for a period of six months in Hall-Harper’s district.

Three months later, Hall-Harper proposed a permanent change to the city’s zoning code. She introduced a “dispersal” ordinance that would restrict the development of dollar stores in North Tulsa. Intended to foster “greater diversity in retail options and convenient access to fresh meats, fruits and vegetables,” the measure prohibits a dollar store from opening within one mile of an existing dollar store in a designated “overlay” district. It also prioritizes full-service grocery stores by cutting in half the number of parking spaces they are required to have.

I’d love to see leadership in the St. Louis region to visit North Tulsa and take action here. Limit their numbers, proximity to each other, require sales of fresh produce.

Here are the results of the recent non-scientific Sunday Poll:

Q: Agree or disagree: We should be happy dollar stores (Dollar Tree, Family Dollar, etc) are willing to operate in low-income neighborhoods.

• Strongly agree: 4 [11.11%]
• Agree: 8 [22.22%]
• Somewhat agree: 3 [8.33%]
• Neither agree or disagree: 5 [13.89%]
• Somewhat disagree: 6 [16.67%]
• Disagree: 5 [13.89%]
• Strongly disagree: 3 [8.33%]
• Unsure/No Answer: 2 [5.56%]

No, we’re not lucky. These dollar stores are part of the problem, not the solution.

— Steve Patterson

Sunday Poll: Are We Lucky Dollar Stores Are Willing To Locate In Low-Income Areas?

Today’s non-scientific poll is about dollar stores:

These stores have gained attention as success stories in the country’s most economically distressed places — largely rural counties with few retail options. Two main chains, Dollar General and Dollar Tree (which owns Family Dollar), operate more than 30,000 stores nationally and plan to open thousands more, vastly outnumbering Walmarts and other retailers.
 
In cities, dollar stores trade in economic despair, with many residents saying they are a vital source of cheap staples. But as the stores cluster in low-income neighborhoods, their critics worry they are not just a response to poverty — but a cause. Residents fear the stores deter other business, especially in neighborhoods without grocers or options for healthy food. Dollar stores rarely sell fresh produce or meats, but they undercut grocery stores on prices of everyday items, often pushing them out of business. (Post-Dispatch)

In many neighborhoods dollar stores are the only stores.

So here’s today’s poll:

This poll will close at 8pm.

— Steve Patterson

On This Day: Fields Foods Opens (2014), Rams Ask To Leave (2016)

A couple of interesting events took place on January 4th in recent years.

Five years ago, in 2014, Fields Foods opened for its first day of business. A red ribbon was cut at an event the night before.  Since then a Tim Hortons opened & closed out front.

Field Foods is set to expand from their original location by adding locations in Dogtown & Downtown West this year.

Three years ago the Rams formerly asked the NFL to relocate to Los Angeles.

The St. Louis Rams, along with the Oakland Raiders and San Diego Chargers, have filed relocation requests with the National Football League, league officials said Monday.

The requests come less than 24 hours after the application period began and sets the stage for a key owners vote on relocation expected to happen next week in Houston. There, owners will vote on which team or teams will be allowed to move to the Los Angeles market in the 2016 season.

The applications will be reviewed this week by league staff and three league committees, which will make a recommendation to owners on the issue.

In a statement on the team’s website, the Rams said, “The St. Louis Rams informed the National Football League today that the Rams propose to relocate to the greater Los Angeles metropolitan area. The relocation would be effective for the 2016 NFL League Year.”

The St. Louis stadium task force, which has proposed a $1.1 billion stadium in an effort to keep the Rams in St. Louis, said the Rams’ relocation request was expected. (St. Louis Business Journal)

Eight days later the NFL owners approved the Rams request 30-2.

As recently announced, St. Louis will be getting an XFL football team. Games begin in just 13 months! It’s hard to predict how well the XFL will do financially, if it’ll survive the initial 3 years of funding set aside.

Even though we knew it was coming, it was still a blow when the Rams asked the NFL to leave. As we welcome the XFL next year, and collecting more rent per game, we might look back on January 4, 2016 as a blessing.

— Steve Patterson

Not Every IKEA Purchase Requires a Car; New ‘Planning Studios’ Will Serve Dense Urban Cities

This post is about our personal IKEA shopping habits and about how IKEA is changing course to respond to a new retail landscape.

IKEA St. Louis opened on October 1, 2015, since then I’ve been many times — Mostly in my wheelchair via public transit. A few visits were just browsing, most were small purchases that would fit in the canvas bag I keep on the back of my wheelchair.

Very different from the many trips I’d previously taken to the two IKEA locations in the Chicago area — my car would be stuffed to the ceiling, the receipt long, and the total in the 3-4 digits. At least twice I ordered from a 3rd party company to have a large order picked up from Chicago and delivered.

It wasn’t until September that we made a local IKEA purchase that required our car, a new bed frame.

This was nothing compared to earlier purchases, but with IKEA store so close there’s no reason to wait and make a big purchase. Last month I got an email from IKEA about comforters on special pricing for IKEA Family members for 3 days only. Since we needed a new comforter to go with our larger bed, I returned in my wheelchair.

While IKEA St. Louis is close to downtown, that’s not true for locations in other regions. In places like NYC not everyone is willing to travel out to the edge to shop. So IKEA is forced to respond:

IKEA U.S. announced today that it is opening its first city center store in the U.S., marking the company’s ongoing transformation and commitment to bringing IKEA into the heart of urban areas. The ‘IKEA Planning Studio’ is slated to open in Manhattan in spring 2019.

Globally, IKEA is adapting and evolving to be more accessible and convenient for customers wherever they are and they recently announced the development of 30 new touchpoints in city centers over the next three years. The New York City location is the first market in the U.S. for the Planning Studio concept.

“We recognize that we are in a rapidly changing retail environment, and to be fit for long-term growth, IKEA is transforming in a way that lets us meet our customers where they are,” said Lars Petersson, Country Manager, IKEA Retail U.S. “New York City is the natural choice to open the first city center store – the most vibrant, dynamic city in the US, and the epicenter of retail, business, and culture.” (IKEA)

Manhattan is just the first in the US to get this new concept, but other cities will follow:

Ikea’s move into Manhattan comes as many retailers — including Target, Kohl’s and Macy’s — are shrinking their existing full-size stores or experimenting with opening up smaller-format locations in densely populated markets such as Manhattan, Los Angeles and Chicago. As more and more shoppers are turning to the internet to ring up purchases, companies are finding they don’t need as much real estate. (CNBC)

Don’t expect to see an IKEA Planning Studio in St. Louis. Again, our full-size IKEA is just a few miles from downtown. With the recently-opened CORTEX MetroLink light rail station the store is easy to reach via transit. A bus line stops right out front.

The idea that every purchase requires a car is false. No doubt many drive to IKEA St Louis and fill their car before returning home, but when you’re just a short transit trip away grabbing a bite to eat making a small purchase (or not) is very easy. I’m glad to see more retailers realizing they need to change to attract customers who live in dense urban centers.

— Steve Patterson

Readers Split on Loop Trolley

Regular readers over the last 14+ years know I’m a huge proponent of rail projects — largely as development tools. To catch you up, I’ve ridden rail lines in the following cities:

1. Chicago (commuter rail)
2. Cleveland (commuter rail)
3. Dallas (light rail & modern streetcar)
4. Kansas City (modern streetcar)
5. Little Rock (heritage trolley)
6. Memphis (heritage trolley)
7. New Orleans (heritage trolley)
8. New York (commuter rail)
9. Portland (modern streetcar)
10. San Francisco (heritage trolley, cable car, commuter rail)
11. Seattle (modern streetcar)
12. Toronto (heritage trolley)
13. Washington D.C. (commuter rail)

Note:  For my purposes here heritage trolley includes existing vintage lines/vehicles, new lines using old vehicles, and new lines using reproduction vehicles. I was unable to ride Dallas’ heritage trolley because their vehicles don’t have wheelchair lifts. Some on the list above were ridden prior to my February 2008 stroke.

I want to return to Cincinnati to ride their modern streetcar that was nearly complete when I visited in 2015. see Cincinnati’s Modern Streetcar. The Oklahoma City Streetcar, a modern 4.6 mile line, is scheduled to begin service next month — a good excuse to visit to the city where I spent my first 23 years.

OK, I like rail projects. That said, I’m fully aware of differences among the types and how well they’re implemented, or not. When I was visiting Cincinnati the track was complete and testing was just started. They had a big PR campaign about how to park cars so the streetcar could pass. Restaurants/bars along the route had drink coasters with streetcar info. Kansas City also did a great job with communications before, during, and after testing. Communications from the Loop Trolley has been…lacking, by comparison.

The OKC Streetcar is another to compare to the Loop Trolley. It’s more than twice as long with ground-breaking in February 2017 — and it’s beginning service next month! Construction on the Loop Trolley began in March 2015 and just recently opened. Half the distance of OKC and twice as long from start to open….embarrassing!

Early on I was excited by the Loop Trolley because a consultant was working to make the line adaptable to modern streetcar vehicles for the future — this would’ve allowed expansion Eastbound on Delmar toward CWE/Midtown/Downtown. But that future-proofing got scrapped.

There’s been no shortage of criticism of the Loop Trolley: buses are cheaper, too expensive to build & maintain, Loop already served by light rail, limited service hours, too slow, etc. While all are valid, they miss the point: development. The Loop Trolley distinguishes The Loop from other shopping/restaurant/entertainment destinations in our region. In the next decade we’ll see gaps filled in with new high-density development. Some existing low-rise buildings will be razed for new development.

Along the route we’ll see an increasing presence of bigger retailers. With the bulk of the route located in the City of St. Louis it’ll help generate new sales/property taxes, the new businesses will provide needed employment. Hopefully some young residents will be able to start their own businesses along the route. Ideally, some affordable housing will get built in addition to apartments geared toward wealthy Washington University students.

A visitor staying downtown who wants to eat fondue isn’t going to take MetroLink to Delmar and then walk nearly a mile to the West end of the Loop, but they might include a Trolley ride there.  After dinner they might decide to walk at least part of the way back to the Delmar MetroLink station. The Trolley helps with the last mile problem.

Because I rode on a free special event day (Small Business Saturday) I didn’t experience buying a ticket and validating it inside the trolley car. I tried to find & download the app to buy a ticket that way. After searching, then asking, I learned the apps have been submitted to Google & Apple, but they’re not yet approved. I plan to ride again on a normal day so I’ll be able to test ticket sales/validation. I’ll also be able to see how it goes with the wheelchair lift on a day when it isn’t standing room only.

In the recent non-scientific Sunday Poll the respondents were mixed:

Q: Agree or disagree: Now that the Loop Trolley is operating on the full 2.2 mile route I feel more positive about it.

• Strongly agree: 8 [19.51%]
• Agree: 4 [9.76%]
• Somewhat agree: 7 [17.07%]
• Neither agree or disagree: 5 [12.2%]
• Somewhat disagree: 3 [7.32%]
• Disagree: 7 [17.07%]
• Strongly disagree: 6 [14.63%]
• Unsure/No Answer: 1 [2.44%]

Despite the endless number of hiccups I still believe, as I did in March 2017, the Loop Trolley Will Surprise Naysayers.  Of course, many will cling to their first impressions and talk bad about the Trolley even if it succeeds in filling in vacant lots along the route. I may have to eat my words…but it will be many years before we’ll know.

— Steve Patterson