Dollar Tree Just Announced a Major Change to Pricing
This will affect the brand's notably low prices.
There are a number of dollar stores across the U.S., but as time's gone on, very few shops have stayed true to their name and managed to continue offering products for just $1. Dollar Tree largely stuck to that price point until 2019, when the retailer began opening new Dollar Tree Plus stores, which offer sections of items for $3 to $5. Then, earlier this year, the Dollar Tree started opening up combo stores, which merge Dollar Tree and Family Dollar, a discount store the former company acquired in 2015. And now, instead of opening up more spin-off stores with new price points, Dollar Tree just announced a major change in pricing for its original brand. Read on to find out what may change the next time you shop at Dollar Tree.
Dollar Tree is raising prices above $1 at some of its original stores.
On Sept. 28, Dollar Tree, Inc. announced new price changes for its original Dollar Tree stores. According to the announcement, the company "will begin testing additional price points above $1 in selected legacy Dollar Tree stores." The company did not indicate exactly which products would be more than $1 in price or which specific Dollar Tree stores will be introducing these higher-priced items. But, according to The Wall Street Journal, more than 100 legacy stores will carry the more expensive products.
"Our brand promise is that customers get great value for what they spend at Dollar Tree. We will continue to be fiercely protective of that promise, regardless of the price point, whether it is $1.00, $1.25, $1.50," Michael Witynski, the president and chief executive officer of Dollar Tree, said in a statement.
The CEO says Dollar Tree has to bring these changes to offset cost increases.
Witynski told WSJ that the higher prices are necessary to offset increased costs to the company. Dollar Tree's lower price points mean that freight costs take up a higher percentage of its gross merchandise margin, he said, and as supply chain issues hit almost every industry this past year, these costs have risen.
The company is also among the many facing labor shortages in warehouses and stores, so it has had to increase pay at some locations, offer sign-on bonuses, and host hiring events, according to Witynski. Now, some of that cost is being passed on to shoppers.
"We recognize the need to make adjustments in the current economic environment," Witynski said, noting there is "pressure … on wages, freight, and on our suppliers and cost increases."
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Dollar Tree says the price increases will also allow stores to carry new products.
According to Witynski, the Dollar Tree is not get rid of $1 items altogether, but the company sees this as an opportunity to offer a wider range of products. Witynski told WSJ that these new Dollar Tree products may include more frozen meat and seasonal items.
"For decades, our customers have enjoyed the 'thrill-of-the-hunt' for value at one dollar—and we remain committed to that core proposition—but many are telling us that they also want a broader product assortment when they come to shop," Witynski said in a statement. "We believe testing additional price points above $1 for Dollar Tree product will enable us over time to expand our assortments, introduce new products and meet more of our customers' everyday needs."
The company says it's gotten positive feedback on its Dollar Tree Plus and combo stores.
While the pricing change may have been partly made out of necessity, Dollar Tree says the shift also comes after "positive customer reaction" from its Dollar Tree Plus and combo store formats. The company plans to have 500 Dollar Tree Plus stores in the U.S. by the end of the 2021 fiscal year. Another 1,500 stores are planned for the next fiscal year, and overall, the plan is to have 5,000 Dollar Tree Plus stores by the end of the 2024 fiscal year.
In terms of combo stores, the company has opened 105 locations thus far and expects to add 400 more by the end of the 2022 fiscal year. There is the potential to have at least 3,000 combo stores opened in the next few years, the retailer said in its announcement.