Dollar General flourishes in rural Iowa while towns fight for grocery stores

In his washed-out blue jeans and plaid button-down shirt, Dave Anderson, the mayor of Manson, stood on the high school auditorium stage and gave his pitch to the residents of the 1,500-person town: Bring back a local grocery store. The future of the town depends on it.

“I think a local grocery store is the center of town,” Anderson said, during the town hall in January. “It’s hard to grow a community without a grocery store.”

Like other rural communities nationwide, Manson is in the paradox of being a producer of food, only to find itself in a food desert.

Anderson reached out to Hy-Vee, Fareway and Kwik Star, even. He said they told him Manson is too close to Fort Dodge, a city with 24,000 residents and amenities like Walmart and Target only 20 miles away.

What the town gained in 2017, however, was a Dollar General. A bright, yellow sign advertises itself at the entrance of town, right off Highway 7.

The store has everything from movies to hammers; light bulbs and Hot Wheels. There’s ham, cheese, milk and bread, but no sign of fruits or vegetables.

Some residents during the town hall questioned if the presence of Dollar General, a multimillion-dollar company that’s rapidly expanding into rural areas, was the cause of their local store’s demise.

The answer isn’t clear, but, “We’re going to move forward because we can’t wait to see what happens,” Anderson said.

Months after the town hall, however, the unexpected spread of COVID-19 has dramatically changed how people shop for groceries. 

Panic buying is emptying grocery store shelves in cities. Communities like Manson are finding the tables have turned — people in urban areas are making the trek to smaller towns in search of toilet paper at local hardware stores.

The efforts to build a new store are put on hold for the moment as people just try to find and afford enough food to survive the difficult economic times.

Anderson said he isn’t worried.

“Rural people are more prepared anyway,” Anderson said. “You don’t have a grocery store anyway, so they prepared six, eight months ago.”

Dollar General’s move into rural Iowa

Dollar General opened its first store in Iowa in 1988. By 2015, the company owned 175 Iowa stores. In the last five years, the number of stores has spiked by nearly 50%. 

Today, Dollar General operates 260 stores in the state, with eight more under construction this year. About 1,900 people are employed at the stores, said Crystal Ghassemi, spokesperson for Dollar General.

Nationally, the majority of Dollar General stores are located in smaller communities, making Iowa a prime state for company expansion. While the company operates 15,000 stores nationally, about 70% of those are in communities with fewer than 20,000 people, Ghassemi said.

Make no mistake, though — the company doesn’t want its stores to be a small town’s supermarket. Dollar General’s business model targets customers who need to quickly pick up a few items, like a loaf of bread or toilet paper — not fill a refrigerator.

“We do have an offering of food products, but it’s a small amount aimed at helping customers fill in, not fill up,” Ghassemi said. “When you come into our stores in comparison to a traditional grocer we have … much more curated and limited store items.”

Independent grocery stores have declined

But at the same time Dollar General has gained a foothold in Iowa, independent grocery stores in rural areas have declined, according to the Iowa Grocery Industry Association.

Since 2011, 93 rural Iowa grocery stores shut down, with 17 of those closing in 2019. 

About 155 rural stores are members of the association now, down 15% from five years ago.

A 2019 study by Inmar Intelligence shows the majority of grocery shopping still happens in a traditional supermarket, but those sales are shrinking because of competition with online shops, wholesale stores, dollar stores and convenience stores.

In 1988, traditional grocery stores commanded the market for food and consumable products for 90% of shoppers. That dropped to 44% by 2017 as supermarkets found themselves facing increased competition.

But the presence of Dollar General certainly isn’t helping the trend, said Joseph Welsh, a grocery consultant based out of Nevada.

In an age of retail decline, Dollar General is becoming one of the fastest-growing companies that’s increasing sales and its footprint, primarily in rural, lower-density areas. In its fourth-quarter report in December 2019, Dollar General reported a nearly 9% increase in net sales and an 11% increase in operating profits.

Rural communities are an ideal place for the company to open shop, Welsh said. Lower-density areas are facing more economic hardships and are looking for more ways to stretch a dollar.

“For a while, everybody was drunk on the dollar concept,” Welsh said. “They’ve done enough damage where they have enough market share. They’re a tough competitor.” 

Competition isn’t the only factor hurting rural grocers

An economic downturn for industries like manufacturing and construction have hurt rural areas, while at least five years of straight losses in the farm economy have compounded, according to a 2018 study by the Iowa State University Extension and Outreach.

Job availability and earnings have been sluggish in recent years for populations with less than 10,000 people, according to the Iowa State study. In contrast, jobs and earnings are booming in metropolitan cities — showcasing the increasing economic divide between rural and urban Iowa.

Ghassemi argues Dollar General isn’t the reason local grocery stores are closing. Instead, she points to the urban and rural divide, saying more consumers prefer to shop in areas where they may also work and play.

Rockwell City Mayor Phil Henlen doesn’t know if Dollar General is the reason the town of 2,000 lost its last grocery store, South Side Grocery, in December 2019. Nick Graham, the same owner who closed down Manson’s last grocery store, did the same to Rockwell City. 

Equipment was old and prices were high. Management of the store was questionable at best, Henlen said. But larger, more pressing issues have contributed to changes in town that Henlen isn’t sure how to fix.

He remembers the town’s three grocery stores, six gas stations, two hardware shops and men’s clothing boutique over his decades of residency. “But most of those I mentioned are gone,” Henlen said.

There’s a prison and a county courthouse that provide jobs. But he’s witnessing the exodus of kids who grew up in town to cities like Ankeny or West Des Moines, where jobs are plentiful and there’s more diverse opportunities.

When he looks into his own wallet, Henlen’s finances don’t look the same as they did 20 years ago. “That’s where the opportunities are and you can’t blame them for that,” Henlen said.

Increased mobility and population loss for the town of 2,000 people means the retail landscape has changed. Employers need people to not only fill their open jobs, but they need the disposable income to shop as well.

In 2000, Calhoun County’s population was 11,115, according to the Iowa Data Center. It dropped nearly 13% to 9,699.

Purchasing power has moved to bigger cities like the nearby Fort Dodge, where most people in smaller area towns work. The choices are more convenient, like a Hy-Vee or Walmart.

With only a Dollar General left in town, Henlen worries how senior citizens who can’t drive will get their groceries. Some good Samaritans are delivering food to their homes, but he’s trying to draw in a business that might be willing to open in town.

“It’s not a good situation but we’re going to manage it the best we can,” Henlen said.

How Manson is fighting for a grocery store

The full parking lot at Manson High School more closely resembled the crowd for a high-stakes baseball game than a weekday meeting for a grocery store.

Residents bundled up in their Carhartt jackets and ski hats and packed the high school auditorium to question their mayor and local economic experts on the feasibility of bringing back a grocery store.

Manson’s solution?

Make the store a co-operative and run it themselves through the local economic development corporation.

“Everyone in this room is going to have to shop there,” Anderson said. “That’s behind the idea of the community putting money into it.”

City leaders’ goal is to raise $200,000 with residents purchasing shares for $2,000.

Much of the equipment in the store has liens on it, Anderson said. They will need to start from scratch and purchase new inventory. But by designating it as a non-profit, city staff could apply for grants to also help operate it.

But it can’t just look the same as it did before, said Jill Heisterkamp, executive director of Calhoun County economic development.

With outside pressures like Dollar General, Amazon and Hy-Vee, there needs to be more unique amenities and products that attract people through its doors — particularly because it will never be able to compete with larger companies’ prices.

And now with COVID-19, the time to change and adapt to consumer needs is more important than ever, she said.

Dollar General isn’t going away anytime soon, and in fact, it’s served as a necessary retailer during the pandemic, Heisterkamp said. Local business owners should now take the opportunity to see how they can offer more specialty goods and services like fresh produce or delivery, she said.

“When we get grocery stores up and running again, the key is being competitive,” Heisterkamp said.

Paullina’s independent grocer survived Dollar General

Laura Palmer moved from Minneapolis to her hometown of Paullina five years ago to run her own grocery store.

Life in a bigger city meant less money, Palmer said. Her family wanted to go on vacation. People in Iowa were more relatable. 

Quickly after she opened her business, Prairie Market, however, Dollar General moved in. She learned from retail experts that she could expect a 20% sales loss.

For the first three months, that’s exactly what happened.

“We were very fearful,” Palmer said.

There came a point, though, where she said she shed the anxiety and dedicated herself to change the store and remain relevant. 

Palmer consulted 20 different independent grocers and saw the ones that changed were the ones still standing. 

She increased her organic produce and gluten-free options at the request of younger families. 

Palmer brought in tomatillos for local Latino residents, a growing population in rural Iowa.

“We moved from Minneapolis to buy this store in my hometown,” Palmer said. “We’re not going to let them ruin what we’ve become.”

She’s also come to accept the Dollar General store as well — after all, it’s managed by people who live in town.

It’s not easy everyday, but with an average of 100 daily customers, Palmer said she feels like a staple of the community. They are also offering delivery now and will prepare groceries for residents who don’t want face-to-face contact during the pandemic.

She credits the town of Paullina for changing itself as well to make more of an effort to bring in young families like herself. It’s essential to draw families in, she said.

“It’s not good to live in anxiety and fear and all of that,” Palmer said. “We had such support by the community that said, ‘Please don’t give up on us, please give us a chance.’”

In March, Anderson announced there is only about $20,000 left to raise for the grocery store. 

While COVID-19 is putting plans on hold, he hopes to open a community grocery store by September or October, once the town has supported its already existing businesses.

“They take care of each other,” Anderson said. “We’ll keep chugging along and keep everyone healthy.