Proliferation of Chicago Discount Stores Restricted by New Law

Chicago is aiming to limit the proliferation of discount stores, also known as dollar stores, with a new law that limits how many of these outlets can operate in the same neighborhood.

The City Council in a 42-7 vote adopted a measure, known as the small-box retailer ordinance, which blocks dollar stores from opening with one mile of existing discount outlets.

Alderman Matt O’Shea, who sponsored the ordinance, said the law is designed to inhibit “over-saturation” of neighborhoods with the stores as well as force owners to take better care of these outlets, according to a report in the Chicago Tribune.

“When a dollar store comes into a neighborhood, they undercut other retailers, especially grocery stores,” O’Shea said, adding that in some neighborhoods dollar stores become the only option, “exacerbating our already very serious food desert problems.”

According to O’Shea, there are now 149 dollar stores operating in Chicago, including Dollar Tree, Dollar General and Family Dollar, with many of these discount stores concentrated in the same neighborhoods.

Dollar store operators argued against the new ordinance, telling the City Council that the one-mile limit is “essentially a moratorium.” Dollar Tree said the ordinance will make it impossible for its stores to relocate, the report said.

“It will bring more harm than help to the very communities it claims to support by limiting the flexibility to improve stores and provide new offerings to people in these communities,” the company said, in a statement.

Dollar stores are rapidly growing in the U.S., with more than 1,000 new outlets opening every year.

According to a recently published study, dollar stores, which sell low-cost food products that tend to be highly processed, often end up pushing out independent grocery stores.

The study, which was written by two professors from agriculture schools at the University of Connecticut and North Dakota State University and a researcher from the U.S. Department of Agriculture, was published in the journal Applied Economic Perspectives and Policy.

The study found that one out of every 20 independent grocery stores will go out of business within a few years of a dollar store arriving in their area. On average, dollar stores coming into an area corresponds to a 5.7% decrease in sales at independent grocery stores.

“You have rapid growth of entry of dollar stores and also a fast exit of traditional businesses. If two or three dollar stores come in, over time this result will be magnified,” said Prof. Rigoberto Lopez, an author of the study, in a report in UConn Today.

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