Dollar stores experience pandemic slowdown

Sandra Beadling was fed up with 70-hour workweeks, delivery trucks days late, and wear and tear on her knees from all her efforts to restock the bottom shelves.

The manager of Dollar general store in Wells, Maine, Ms. Beadling, 54, had tried to hire more help. But it was a tough sale when Walmart was offering $ 16 an hour and its store paying $ 12.

Ms Beadling had spent long periods this summer as one of the few employees in the store, taking care of the cash register and trying to help shoppers. She had begged her managers to allow part-time store workers to have more hours, but to no avail.

One evening last month, Ms Beadling closed Dollar General at 10 a.m., returned home at 11:30 a.m., then left her house at 4 a.m. to return to the store for an inventory check. “I was so tired that I couldn’t find my words,” she said. She texted her deputy manager a text saying she had quit, then blocked the numbers of her colleagues so they couldn’t call her back and persuade her to stay.

“It was not sustainable,” Ms. Beadling said.

Some wonder if the same can be said of the unbridled success of dollar stores and their business model, which has benefited from the prevalence of poverty and disinvestment in downtowns and rural America. Dollar stores, which pay some of the lowest wages in the retail industry and often operate in areas with little competition, are stumbling into the later stages of the pandemic.

Sales are slowing and some measures of earnings are declining as the industry grapples with a confluence of challenges. They include exhausted workers, pressures to raise wages, supply chain issues, and a growing number of towns and villages rejecting new dollar stores because, they say, the business model is hurting their businesses. communities.

Just this week, Dollar Tree, which also operates Family Dollar stores, said it will start selling more products above $ 1. The move has great significance beyond the discount retail industry, analysts say, as it indicates that a company that has built its brand by selling $ 1 merchandise feels the need to change its model. to account for higher wages and an unreliable supply chain from Asia.

“This means these problems can be permanent,” said Scott Mushkin, founder and analyst at R5 Capital, a retail-focused research and advisory firm.

The unrest follows a year of skyrocketing profits and a period of breakneck growth in the industry. About one in three stores announced to open in the United States this year is a dollar store, according to Coresight Research, a retail consultancy, a sign of the industry’s success in 2020.

The business model, which relies on relatively cheap labor and cheap products, is designed to thrive even when its major customers suffer financially. The strategy was refined during the high unemployment and wage stagnation of the Great Recession of 2008.

But dollar stores aren’t as well equipped for today’s surreal economy, as workers like Ms Beadling step down in protest and a single case of coronavirus on a container ship can delay two months of transporting Chinese-made goods to the United States. States.

“This is another pandemic case exposing the underlying vulnerabilities in the way we have built our economy,” said Stacy Mitchell, co-director of the Institute for Local Self-Reliance, a advocacy group that criticizes many large companies. retailers.

While nearly all retailers face shipping and distribution issues, dollar stores may have difficulty passing the increased costs on to price-sensitive customers.

Dollar Tree said it expected up to $ 200 million in additional transportation costs this year.

In a conference call with analysts in August, Dollar Tree chief executive Michael Witynski recounted how one of the ships the company chartered was denied entry into a Chinese port after one crew member had tested positive for the virus. The ship had to change crew in Indonesia before returning to China.

Mr Mushkin said of Dollar Tree: “They’ve got it all the wrong way.”

Dollar General said it hired an additional 50,000 workers between mid-July and Labor Day, but admitted in August that its labor costs were increasing spending. Analysts say some of the extra spending is driven by pressure to raise wages.

Yet the higher salary may not be enough to encourage employees to stay on the job. Workers say stores are chronically understaffed and dependent on part-time workers who have unpredictable schedules and cannot afford the employee contribution required for health care benefits.

In a statement, Dollar General said, “We pay competitive salaries, which are determined based on several factors, including the relevant job market.” The company added that “our operating standards are designed to provide stores with sufficient working hours, and we don’t expect store managers to work 70 to 80 hours per week.”

Part-time workers sometimes face the opposite problem of not having enough work. As a store manager, Ms Beadling said, she was constantly trying to find overtime to give to her employees who needed the money, including a worker who lived in a tent because she couldn’t pay the rent.

But the hours allocated to the store were limited by senior officials, she said.

This summer, social media was buzzing with pictures of dollar stores, Lincoln, Nab., in Pittsburgh and beyond, where employees had posted signs on the front door announcing that they had left work.

“Capitalism will destroy this country,” read a sign in the window of a Dollar General in Eliot, Maine this spring. “If you don’t pay people enough to live their lives, why should they work for you? “

Paige Murdock, manager of the Eliot store, was the first to resign. The company limited the hours it could give to its staff, she said, which often meant it was running the store under-staffed.

She went weeks without taking a day off or seeing her family, but as a salaried employee she did not receive overtime pay. When an official said Ms Murdock, 44, could not take her previously approved week of vacation to help her daughter, who is in the military, relocate to Texas, she decided to resign.

“If you look at my resume, I’m a very loyal employee,” Ms. Murdock said. “I’m going to work my heart. Any other jobs I left, I would give two weeks notice. I’m not calling. I’m not asking for much.

Mr. Murdock now works in a warehouse for a coffee company and takes deliveries to DoorDash to fill in the gaps.

In its statement, Dollar General said that the turnover of its managers “has been at historically low levels in recent years.”

Chris Burton started working at a Dollar General in New Orleans in the spring of 2020, earning $ 10 an hour. Saxophonist, he accepted the post because his work as a substitute teacher and his musical performances had been suspended during the pandemic. Over a year later, his hourly wage has only increased by $ 11.

“Walmart will earn you up to $ 15 a lot faster,” said Burton, 34, who works with Step Up Louisiana, a workers’ rights group that advocates for better working conditions in the city. dollar stores. “But Dollar General will never pay as much as Walmart. This is how they keep their prices lower. It is basic economics.

Wall Street is also taking note of low wages and employee complaints about working conditions.

“We regularly see shelves stocked in disorganized fashion,” said Brad Thomas, analyst at KeyBanc Capital Markets. “As a retail analyst who indicates that the store does not have enough manpower or the right manpower. “

Mr Mushkin of R5 Capital said other large retailers reacted more quickly to changing working conditions by raising wages when their sales were booming last year. These early moves had a smaller impact on their bottom line than dollar stores are experiencing.

“We offer our associates flexible hours and competitive compensation in the market, and in all cases, we are at or above minimum wage in the markets in which we operate,” Dollar Tree said in a statement. .

Political attitudes towards dollar stores in some communities are also changing. Since the start of the pandemic, nearly three dozen communities have overstepped dollar store development boundaries or rejected stores outright, according to the Institute for Local Self-Reliance.

Dollar stores say these are the exceptions. “We are always disappointed when local lawmakers choose to limit our ability to serve their community, but these relatively few situations have not materially hampered our ability to grow,” Dollar General said.

The company added, “We provide our customers with convenient access to the essential items and the quality brands they want and need, including the components of a nutritious meal,” including fresh produce, which are offered in a growing number of stores.

Although the opposition is barely making a dent in stores over $ 1,620 slated to open this year, some action has been taken in major markets such as the Atlanta and Cleveland area, and in small towns such as Warrensburg, NY

There was considerable opposition within the Warrensburg board of directors to a Dollar General that was to be built on Main Street.

Bryan Rounds, a board member, said Warrensburg in the southern Adirondack has long been primarily a “passing town” on the road to lakeside camps or the ski slopes further north. But during the pandemic, Warrensburg, like many rural areas, became a popular location for Airbnb rentals.

“There are things going on around here,” Mr. Rounds said. “We don’t need one of these stores.