Don’t pick on Dollar General
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.
By Tim Kalich
Greenwood Commonwealth
Electric vehicles face obstacles
The world’s shift from gasoline-powered vehicles to electric-powered ones is under way. But there’s a long way to go, and there are significant hurdles to overcome before a majority of new-vehicle sales are electric models.
A story in The Washington Post listed four big challenges. Any one of them, if not met, would prevent the country from meeting ambitious electric vehicle goals being developed by the Biden administration:
• Can the nation’s power grid deliver the extra juice required to charge electric vehicles?
This conversation involves providing reliable energy for tens of millions of vehicles — the way convenience stores and their gasoline sales do today. To do this, the Department of Energy estimated that electric transmission systems may need to be expanded by 60 percent by 2030, and their capacity may need to triple by 2050.
“That expansion is not on track,” the Post reported. “Fights over where utility lines should be located, who should build them and who should pay for them continue to create major bottlenecks.” Along with that, it now takes an average of four years to add a wind or solar power project to a regional electricity grid.
• Will enough charging stations be available for the growing number of electric vehicles?
The Post described the present electric charging network as “dysfunctional and inadequate. The ones that do exist are often broken. The stations are often a money loser for their owners, and acquiring the real estate is a daunting task.”
The U.S. now has 140,000 charging stations, and the federal government is putting up money to build more. There should be a uniform design, the way there are for gas pumps, for maximum efficiency and convenience. But first you must start at the beginning: Who’s going to operate a charging station if it loses money?
• Can the U.S. obtain enough scarce minerals for electric vehicle batteries?
Automakers who are jumping into electric vehicle manufacturing are seeking stable supplies of cobalt, nickel, manganese and lithium. Congress is trying to help. It has included subsidies and restrictions to ensure that electric vehicle batteries are built with supplies from the United States or its trading partners.
One problem is that it can take up to 10 years to start a new mine, due to environmental concerns and local opposition. If that timeline continues, it will be 2033 before any new U.S. mines start delivering these battery minerals.
• What about the probable legal challenges?
Some critics say the Environmental Protection Agency’s proposed mileage and emissions standards for non-electric vehicles are a disguised attempt to ban the use of gasoline and diesel fuels, even though the higher standards wouldn’t take effect until at least 2027.
Last year, the U.S. Supreme Court limited the EPA’s authority on climate change, saying the agency didn’t have authority to impose sweeping changes on the electric power industry, or other major sectors, without explicit permission from Congress. It is not farfetched to envision the court saying the same thing about gasoline-based mileage and emission standards.
Put it all together and it’s clear that a lot of work needs to be done if the country is serious about reducing its carbon generation by phasing out gasoline vehicles. Any skeptic of this change could make a coherent argument that the benefits may not be worth the cost.
That argument, though, ignores the creativity and ingenuity that has powered the American economy for more than two centuries. It also ignores that countries from China to Norway are well ahead of us on this transition.
Our culture always has been willing to try new ideas, even the big ones. That willingness is going to be tested over the next decade.
Jack Ryan
Enterprise-Journal
