Grocery Goliath: Small-town Nebraska grocery stores disappear as Dollar General booms

OAKLAND — If you drive down U.S. Highway 77, you won’t see the grocery store that has managed to keep afloat in this town for more than 100 years. It’s five blocks off the highway, on Oakland’s main drag. 

What you will see is a bright yellow sign, beckoning highway drivers to make a pit stop. You’ll see the beige cinder block storefront and metal warehouse walls plopped between cornfields and the highway. 

In small-town Nebraska, it’s an instantly recognizable sight. 

It’s the Dollar General. 

Over the past 25 years, Dollar General stores have become a fixture of the retail landscape in rural Nebraska. In 2000, the only Dollar Generals in the state were in Omaha and Lincoln, according to a Flatwater Free Press analysis of Nebraska grocery store permits. 

Now, there are 142 chain “dollar” stores — 115 of them Dollar Generals — located in Nebraska towns with a population smaller than 10,000. 

In that same amount of time, the number of grocery stores in those small cities and villages has shrunk from 326 to 272. 

“A grocery store is about quality of life,” said Charlotte Narjes, an University of Nebraska-Lincoln expert in helping rural grocery stores stay sustainable. “It truly is an anchor institution for many of our rural communities.” 

Local grocery stores matter, experts say, because they’re often a community gathering space and often the last line of defense keeping a town from becoming a “food desert” where residents can’t get affordable fresh foods. They also keep money in the local economy and help stem population loss.

But it’s becoming harder to keep those rural grocery stores open, owners and advocates say, citing a growing list of challenges including slim profit margins. Small-town stores face higher wholesale costs than big-box stores. A generation of owners is aging out, their customer base is shrinking and there aren’t many people willing to risk buying a store. 

The proliferation of Dollar Generals — often a cheaper competitor — tacks one more challenge onto that list. 

“We hear a lot about rural brain drain,” said Jillian Linster, senior policy director at the Center for Rural Affairs in Lyons. “But the catch is, if you want people to come and live and work in your community, they have to have a place to shop for food.” 

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The walls of Nelson’s Food Pride in Oakland are filled with framed yellowing newspaper clippings — 20th-century ads, old stories about grand openings and new locations. 

Julie Johnson is the third generation in her family to run the Oakland grocery store. When she retires, her son will become the fourth.

She greets those who come in as they shop for cases of water, boxes of frozen pizza rolls, cartons of berries. In this town of 1,359, Johnson knows most everyone’s name, and feels guilty when she doesn’t.  

“That’s small-town business,” she said. “Somebody has a birth and we hug them, and they have a death and we hug them.”

But for the past few years, Johnson says, traffic in and out of the family grocery store has been sparse.

Through the 1980s and ’90s, she watched as the Walmarts, Menards and Costcos of Fremont and Omaha started siphoning off her customers. 

That big-box expansion focused on larger communities, cities with populations between 10,000 and 50,000, said Kennedy Smith, a senior researcher for the Institute for Local Self-Reliance, which promotes local community development.

Big-box stores hurt but didn’t actually move into places like Oakland. 

Then Dollar General came to town. 

It came to many small towns, a previously untapped market. 

“That’s why I think Dollar General has gravitated here,” Smith said. “They tend to look for communities where they don’t think they’ll have a lot of competition.” 

Chain dollar stores like Dollar General and Family Dollar saw the second-largest food retailer growth behind supercenters like Walmart from 1990 to 2015, according to the U.S. Department of Agriculture. And the Dollar General model appears laser focused on rural America — as of 2022, three-quarters of Dollar Generals were in communities smaller than 20,000 people, according to a Forbes analysis. In Nebraska, 75% of Dollar General locations are in a town smaller than 10,000 people. 

That can come at the expense of local grocers, a USDA study found last year. 

When a dollar store enters a rural community, local grocery stores are 5% more likely to close, according to the decades-long analysis, and their sales declined by 9.2% on average. 

In big cities, the impact of a dollar store wore away after about five years, research showed. But the effects were lasting in small towns.  

“A full-service grocery store operates on extremely thin profit margins,” Smith said. “They might make 1% or 2% profit on their sales annually. And so it doesn’t take a whole lot of cutting into their sales for that business to be at risk.” 

At Laurel’s Hometown Market, owner Brenda Whalen didn’t think the Dollar General cut much into her business. Sometimes, it seemed to bring her business — people would come to town to stop by Dollar General, then the grocery store for steaks and fresh produce. 

But last summer, the Dollar General closed for days because of air conditioning problems. And Whalen realized her aisles were suddenly busier. 

“Our sales those days were phenomenal,” Whalen said. 

Even as it competes with some local grocers, Dollar General is getting help from Nebraska taxpayers. 

In 10 communities across Nebraska, Dollar General has saved $801,335 in tax credits through tax increment financing since at least 2012, according to annual TIF reports. 

The state has also put money toward Dollar General’s operations — in 2020, the Department of Economic Development awarded $500,000 in building development funds to Washington County’s economic development corporation. The money helped build an 85-acre Dollar General distribution center in Blair. 

Back in Oakland, down the road from Nelson’s Food Pride, the Dollar General had a steady stream of people on a recent Tuesday morning. They grabbed energy drinks, cans of beans and frozen foods. The shelves were stocked with pots and pans, shampoo and bath soap. One aisle offered summer items: picnic plates, pool towels and pink plastic palm tree cups. Picture frames and lamps filled another aisle. 

There is milk and frozen pizzas. There is no fresh produce. 

At Nelson’s, Johnson sells fruit, vegetables and different cuts of meat. There’s a refrigerated section that she added after buying the store from her dad, where she stocks ice cream and alcohol. She sells specialty items like Swedish desserts and sausages — her family came to Nebraska from Sweden. 

When she’s not at the store, she’s running the local Swedish Heritage Center, or weeding the nature trail at the park. 

“The Dollar Generals kill us,” Johnson said. “They don’t give anything back to the community. I give everything back to the community … You don’t even know who owns the dollar store.”

On its website, Dollar General, which has more than 20,500 stores in 48 states, says it has donated $271 million to support more than 23 million people through the Dollar General Literacy Foundation. It also says it has donated more than 50 million meals to Feeding America and partner food banks. Dollar General didn’t respond to email requests for an interview for this article.

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At the Elwood Hometown Cooperative Market, COVID-19 proved surprisingly good for business, said Mary Nelson, a member of the market’s co-op board. People shopped local in 2020, and the store offered delivery. 

But then sales declined, then plummeted when the Walmart in nearby Lexington started delivering to Elwood.

The Elwood Market closed its doors in March. 

“I think (people) have found that they really miss having a grocery store that they can go to,” Nelson said. “But they do still have Dollar General.” 

The challenges leading to Elwood Market’s demise aren’t unique. The remote nature and small client base of rural grocery stores means wholesale product costs are more expensive than for bigger stores. Small-town grocers are purchasing fewer items that have to travel farther to get to them, said Ansley Fellers, executive director of the Nebraska Grocery Industry Association.  

The buildings are often aging. In Laurel, Whalen has put thousands toward fridge and electrical repairs. 

“Everything that breaks down all the time just kills us,” she said. “You can’t get ahead when you’re trying to put all the money into repairs and making things look a little nicer and better.” 

Whalen and her husband also owned a grocery store in neighboring Coleridge for two years. The expenses started to rack up. 

“We weren’t losing a ton of money, but we weren’t making much, either,” Whalen said. “So the bank said, ‘You guys really need to think about closing that door.’” 

Narjes, associate director at UNL’s Nebraska Cooperative Development Center, said she recently has seen more older owners wanting to sell and retire. They struggle to find anyone with grocery industry experience who is open to the financial risk. She also has witnessed a growing number of people who buy a grocery store, then realize after a few years that the work is too hard and the profit margins too thin. 

Last session, state Sen. Teresa Ibach, a Republican from Sumner, sponsored a bill that would create a grant program for small, locally owned grocery stores in cities with fewer than 40,000 residents. The grants would be open to grocery stores more than 25 miles from another grocery store. 

The grants could cover things such as access to a refrigerated truck for deliveries, internet upgrades or online ordering systems. Or they could help launch co-operative models, or partnerships with other businesses, to lower wholesale prices. 

“You want a one-time infusion of cash to pay for something that … will make that store more sustainable and maybe more profitable in the community long-term,” Fellers said. “It’s not just … to pad your bottom line for a while.”  

It would take $250,000 to set up the grant program, with the goal of giving out $2 million in grants annually. 

Ibach said she hopes to see the bill become law next legislative session. “I will sure push for it,” she said. 

Small-town grocery stores need to get creative to survive, Fellers said. Some are already trying new business models. 

In Cody, high school students run the Circle C Market as a part of business classes. Other towns, like Emerson, have become co-ops, where community members pool funds to launch grocery stores and split profits. 

In Lynch, population 187, volunteers help stock shelves and unload deliveries. Exeter plans to pilot a new program where paying members would be able to enter an unstaffed store via keycard, shop and then pay through self-checkout. 

When Emerson reopened its grocery store in an old American Legion building, other businesses on main street saw an uptick in business, Narjes said. New stores opened, too. 

In Oakland, Johnson remembers the days when Main Street had multiple grocery stores, women’s and men’s clothing stores, jewelers and car dealers. All those stores, save for Nelson’s Food Pride, are gone now. The hospital was torn down, too, replaced with a medical clinic and pharmacy. 

To lose the grocery store? 

Kylie Penke thought about that while recently shopping there, picking up jugs of water for a student display at the Burt County Fair. 

It’s a community hub, she said. Some people say it costs more to shop here, but it also costs gas money to drive to a bigger grocery store in a bigger town.

And Oakland — really any small town — is fragile, Penke said. If you lose one piece, “then another piece seems to fall.”

Nelson’s Food Pride is one giant, remaining piece.

“That would be the worst thing that could happen to our town,” Penke said. 

The Seacrest Greater Nebraska reporter covers issues across the state of Nebraska. It is named in honor of philanthropist Rhonda Seacrest and her late husband James, who proudly led several Nebraska newspapers through Western Publishing for 40 years.