ALEXANDRIA, Va.—Items at Dollar Tree will no longer be just one dollar, reports the Washington Post. The discount retailer is raising its prices by 25% for the first time in 35 years. Most items will cost $1.25.
“Lifting the one-dollar constraint represents a monumental step for our organization,” President and Chief Executive Officer Michael Witynski said in a statement. The higher price point will give the company “greater flexibility to manage the overall business, especially in a volatile, inflationary environment.”
In reporting earnings for its fiscal third quarter ended October 30, Dollar Tree said now “is the appropriate time to shift away from the constraints of the $1.00 price point in order to continue offering extreme value to customers. This decision is permanent and is not a reaction to short-term or transitory market conditions.”
Dollar Tree cited internal surveys indicating that most customers are aware of the price increase and still plan to shop the discount chain with the same or increased frequency. “Many have also indicated they are seeing price increases across the market and that Dollar Tree is still providing the products they need at an undeniable value,” Dollar Tree said.
The shift to $1.25 has been happening since this summer, and the increased price allows the company to reintroduce popular items that had been dropped because of the $1 cap. In September, the chain began testing items that cost more than $1 at its Dollar Tree Plus stores, and officials said customer feedback has been positive.
Dollar Tree, as well as other discount retailers, has done well during the pandemic, posting higher sales and profits. In the most recent fiscal quarter, Dollar Tree said it opened 125 new stores, or more than one a day. Rival Dollar General continues to expand and plans to open an additional 1,650 locations this year, which is nearly half of all new national retail openings, according to Coresight Research. On November 13, Dollar General announced the opening of its 18,000th store, which is located in Gulf Shores, Alabama.
Discount retailers continue to encroach on c-store territory, and the incursion of dollar stores on the c-store space “represents the greatest immediate threat to the convenience industry,” according to a recent NACS State of the Industry report. Dollar Trees feature a Snack Zone concept in an effort to move additional cold beverages, candy and snacks. Family Dollar—owned by the same company—sells alcohol. Dollar General is bringing fresh fruits and vegetables to as many as 10,000 stores over the next several years, with a number of those in current U.S. Department of Agriculture (USDA)-defined food deserts. Fortunately, many convenience retailers are moving beyond “gas, Cokes and smokes” and embracing a differentiated offer anchored in foodservice.
Dollar stores are struggling to maintain their business model in the later stages of the pandemic. Overworked employees, wage increase pressures, supply chain disruptions and communities against dollar stores are among reasons why sales are lagging at these types of retailers.