Dollar Stores, Urban Deserts, Sustainability and Black Lives Matter
I´ve been following Dollar Stores (Retail store that sells general merchandise, such as apparel, automotive parts, dry goods, hardware, home furnishings, and a selection of groceries. It usually sells them at discounted prices, sometimes at one or several fixed price points, such as one dollar – Wikipedia) growing in the USA (but also growing in many other developed countries) for the past few years and is probably one of the few winners in the covid-19 era in regards to Retail. Its success story analysis should, in my opinion, include its causes and consequences in regards our societies and “way of life”.
Dollar General opened 1,000 stores in the USA in 2019 and said it remains committed to opening 1,000 new stores and 80 store relocations in fiscal 2020. As of 2018, there were 31,620 dollar stores across the United States according to Statista. In 2018m sales of groceries at Dollar Tree and Dollar General combined were approximately $24 billion nearly eclipsing Whole Food’s sales of $15 billion. This is taking place when more than 100 retailers in the USA filled for bankruptcy in the 2019-2020 period, including Neiman Marcus, JCPenney, Muji USA, Dean & Deluca, Fairway, JCrew, Lord & Taylor or Beauty Brands.
Dollar store chains keep growing in markets that Amazon or Walmart seem to ignore: rural towns. But, you might ask yourself: Why rural customers don´t shop at Amazon or Walmart online? Lower-Prices?
I thought Dollar Stores wouldn´t sell online because their business model (low-price strategy, high inventory turnover, low-quality-margin products) reminds me to Primark, the Irish fast fashion retailer, which small margins makes it difficult to sell online. Then, I realized that Dollar Stores are also selling online! But, honestly, UI/UX is very poor and their fulfillment and delivery times is estimated to be 10-14 days at Dollar General.
Is environmentally-conscious consumerism exclusive to wealthy people?
More and more companies (in grocery, fashion, etc) are accelerating change towards sustainability while customers are demanding environmentally-friendly products, healthy food, product traceability, responsibly sourced food, better quality to increase product´s lifecyle, etc.
But who are these “eco-conscious” customers? According to Forbes, compared to typical shoppers, Whole Foods customers love to exercise and embrace what is termed “athleisure,” as 62% are more likely to visit stores like Lululemon. Sixty-seven percent are more likely to spend time outdoors. They are 82% more likely to work out with a personal trainer and 56% more likely to take yoga classes. This definition could be used as a standard to define wealthy customers and their “tastes” in western societies.
Therefore, we could conclude that “eco-shopping” or having a “green lifestyle” is often available only to the wealthy. Retail Shopping choices can be mapped to Maslow´s pyramid where every industry will see companies positioning across the different layers or segments that correspond to customer needs. At the top of the pyramid, we would find sustainable fashion brands and eco-friendly retailers (e.g. Whole Foods). Not everyone can afford a $25 avocado toast or 45$ Patagonia organic cotton t-shirt. Being eco-friendly is cool but expensive.
Today, there are more dollar stores in the United States than all Walmarts and Starbucks combined. What is the real social cost?
This phenomenon takes place in our current cultural context of climate change that emphasizes the need of rethinking the way we consume (eat, wear, work, travel…) and make business. Meanwhile, inequalities are rising in most developed countries and #blacklivesmatter momentum requires new policies (and even institutional changes) urgently. As I said in Coronavirus, the biggest challenge to face, covid-19 is exposing the limits of our socio-economic model. This is not a spark or flame, but a big fire.
It´s not surprising that António Guterres, Secretary-General of United Nations, introduces the World Social Report 2020 saying “In North and South alike, mass protests have flared up, fueled by a combination of economic woes, growing inequalities and job insecurity. Income disparities and a lack of opportunities are creating a vicious cycle of inequality, frustration and discontent across generations”.
Last week, while driving back home, I heard the term “urban food desert” on the radio. According to wikipedia, a food desert is an area that has limited access to affordable and nutritious food, in contrast with an area with higher access to supermarkets or vegetable shops with fresh foods, which is called a food oasis. I searched more insights and found that an estimated 54.4 million people, or 17.7 percent of the U.S. population, live in tracts that are low-income and low access and are more than ½ mile or 10 miles from the nearest supermarket, according to the United States Department of Agriculture. This areas are magnets for dollar stores.
“The middle-class continues to go away, unfortunately, to the lower end of the economic scale … so as this economy continues to create more of our core customer, I think there’s going to be more opportunities for us to build more stores.” — Todd Vasos, CEO, Dollar General (2018. CBInsights)
Making an assumption, if Dollar Stores are growing, lower-income population (and inequalities) might increase too. This is what the charts above are showing and Covid-19 is likely to increase poverty. How are we going to eradicate racism, reduce education failure, reduce obesity, diabetes and cholesterol, teach about the environment, …, if inequalities increase? And this is not only a US problem as shown in “The Rise of Inequality around the world” chart.
Lack of accessibility to healthy food is an important aspect of food insecurity, as good nutrition plays an important role in the optimal growth, development, health and well-being of individuals in all stages of life. Healthy eating can also reduce the risk of chronic diseases such as heart disease, stroke, diabetes and some types of cancer. The economic cost of food insecurity is about $90 billion per year in increased medical care costs (A rights-based approach to food insecurity in the United States. Chilton M, Rose DAm J Public Health. 2009 Jul; 99(7):1203-11).
Covid-19 economic crisis will increase this trend as consumers will be more frugal, so we can expect more grocery and supermarkets closing stores. But other retailers might struggle too. Dollar stores are increasing their offer while position themselves as one-stop shop where customers can find a wide assortment including cleaning, health & beauty, food & beverages, household, electronics, toys, baby, apparel, pet, amongst other product categories.
Mass-market retailers goals, apart from making money, should include embracing sustainability.
Urban Fashion Deserts
The idea of this article, even if it´s not 100% fashion-related is aligning the dots, sharing some thoughts on the interrelation of the factors mentioned above and the possible consequences in Fashion. Dollar stores and discount supermarket chains (e.g. Aldi, Lidl, Carrefour) are selling apparel and accessories too. Where are they manufacturing? What materials are they using? What is the environmental cost? Are human rights respected? Are they recycling? How sustainable is their supply chain?
As mentioned before, more than 100 retailers filled for bankruptcy between 2019-2020 and many of them are fashion retailers (e.g. J. Crew, Lord & Taylor, Neiman Marcus, Brooks Brothers, John Varvatos, Aldo Group, G Star Raw, Roberto Cavalli, Diesel, Barneys New York…). What if these retailers are replaced by discount supermarkets, dollar stores or Amazon Fashion?
Many times, trends are presented as something “holistic” or generic, but we need to differentiate early adopters to early and late majority. Economic crises can accelerate but also decelerate trends. As I said before, being “green” is expensive and it won´t be the first choice when buying food or clothing for many people during covid-19 period.
Making “circular fashion” more affordable, and fresh food as well, should be a global goal. Middle-class is shrinkring and the socio-economic perpectives are not optimistic. A public-private collaboration is needed to address the socio-cultural, political, economical and environmental challenges we are currently facing. Radical capitalism and populism are not the solution.
Technology will play a critical role helping companies to optimize their business operations, reducing financial risks and ensuring the quality and sustainability of their products as described in fashion technology ecosystem. More efficient companies will provide higher quality items for lower prices, transforming the shopping choices and giving back to society. Doing well by doing good is possible.
- Capital and Ideology (Thomas Piketty. Harvard University Press. 2020)