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First, Dollar Tree started selling items for more than just a dollar – and many shoppers didn’t take kindly to the news, saying there are already plenty of stores where they can buy things for a few dollars more, like Dollar General, Walmart and Five Below.

So how will they react when Five Below itself – named after its promise to sell everything at $5 or less – starts selling things for $5.25, $5.50, or even $10?

It seems we’ll soon find out. Internal and external forces alike have prompted the retailer to rethink the maximum price point that’s right there in its name.

Since 2002, Five Below has offered fun and trendy items for tweens, teens and those who are young at heart, promising “hot stuff” at “cool prices”. As it expanded to 750 stores in 36 states, Five Below’s prices have remained at $5 and below.

But an internal decision to try offering a greater variety of products, together with the external challenge of higher U.S. tariffs on Chinese-produced products, has Five Below altering its pricing strategy on two fronts.

First, the retailer plans to expand an ongoing test involving selling certain items at higher price points. This test predates the U.S.-China dispute and has “nothing to do with tariffs,” CEO Joel Anderson told investors recently. A selection of certain merchandise in a handful of test stores is labelled as “JUST WOW” or “Ten Below” (stores are testing both names).

“This is our in-store test providing extreme value merchandise at price points up to $10,” Anderson explained. “For example, we are offering a digital camera, and amazing gaming headphones, each for $10.”

The test, which will be expanded to about two dozen stores in the coming months, will allow the retailer to sell some higher-priced products that it otherwise couldn’t offer for $5 or less.

“We were working on that long before tariffs and we still continue today to see that as a different proposition to the customer. It’s about delivering extreme value,” Anderson said. “The feedback from our customers continues to be positive.”

But then there are the tariffs, which could have an impact on Five Below’s pricing that may not be perceived quite so positively.

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Many low-priced retailers that are heavily reliant on inexpensive Chinese imports have warned that the tariffs could force them to raise prices. But in Five Below’s case, those prices are already on the rise.

The retailer is gingerly testing out increased prices in a few dozen stores. Raising some products’ prices from, say, $2 to $2.25, may not be so noticeable. But raising prices beyond its traditional $5 maximum, might get some shoppers’ attention.

While “the vast majority of our product will still be priced under $5,” Anderson said, “we are going to have to raise some prices on a select amount of product, some of it $1 to $4, and some of it above $5.”

Five Below has been working with vendors to try to keep costs down, and is considering moving production of some items to countries other than China. Even so, price increases across the entire chain could be inevitable.

“Increasing prices beyond the $5 price point is a decision we do not take lightly. We have put a lot of thought behind this decision and will proceed with pace and diligence,” Anderson promised. “Whether some items are priced at $5, $5.25 or $5.55, we remain firmly committed to providing extreme value to our customers.”

But “we’re talking about cents changes, not dollars changes,” Anderson pointed out. So the highest-priced products will still be $5 and change. Anything $6 and up will fall under the “JUST WOW” or “Ten Below” umbrella, which is a “completely different set of product and it’s a whole different initiative,” Anderson explained.

The pricing changes come at an interesting time, since Dollar Tree is suffering some backlash for offering higher-priced products than its name would suggest. The “everything’s a dollar” store is expected to mitigate the impact of tariffs by shrinking pack sizes, for example, in order to keep most items at the $1 price point. But separate from the tariff issue, it’s testing a selection of “Dollar Tree Plus!” items priced at $3, $4 and $5.

“This is not raising items from our $1 price point to a higher retail. This is about adding new items and categories,” Dollar Tree CEO Gary Philbin explained a few weeks ago. But early reaction online has been largely negative, with some customers complaining that the higher-priced offerings muddy the retailer’s “everything’s a dollar” message.

Five Below’s pricing message – offering products at a range of prices from a dollar up to $5 – is not quite as strict as “everything’s a dollar”. So there may not be as much of a backlash to prices that go up by a quarter or so. The jury is still out, however, on how shoppers accustomed to spending no more than $5 per item will feel about “JUST WOW” or “Ten Below” items that cost twice as much.

In the end, “our whole business model is based on delivering extreme value to our customer,” Anderson said. “None of that changes with this.”

Dollar General, Family Dollar and other “dollar stores” have long since stopped selling everything for just a dollar. So it will be up to Five Below shoppers to decide whether they’re willing to pay up to $10 for a single item there – or whether they’ll hold Five Below to its name.

Photo by JeepersMedia

13 Comments

  1. The sad fact is I can just order my phone Chargers from Amazon and get Three for 12.99 and that is under five dollars. And with Amazon having next day and even same day on some products I can see why that is the way of the future. I can wait one day and save the money

  2. Just wait…..get ready for store closures

  3. Went today in va mall, the items they had for $10 were gamer keyboards and headphones which is fairness is an ok price . BUT I’m not a fan of them raising prices around the store. Now most things are 4-5 bucks vs 2-3 bucks for items you can else where for cheaper, I spent $32 in the store, items like a brush $4 and a cheap looking toy kid vest $5 ..could have been brought for $1 each …I feel like I paid wayyyy to much …I’ll think Twice about going there again .
    Stores are closing down and their market is teens and those looking neat little things for cheap…they will lose that customer ..and the quality of their off brand items isn’t good …
    look them closing stores in the near future ….

  4. out raged change the name and I wont be rushing there to pay there price hike

  5. It is not 5 and below its 5.99 and below they need to change their name if they are going to false advertise. I was schocked when i took enough 5.36 for my charger for it to be 5.88 after taxes i didnt bring more money with me i went specifically there for it so its pretty ridiculous

  6. Yesterday, I went to the Five Below in Gaithersburg, MD and was suprised to see some of my routinely purchased items now being more than $5. The pricing was the whole reason I shop there. My concern isn’t really about the item I purchased that is now $5.55, or the one that is now $5.95. Instead, I’m wondering how high the company is going to go. It used to be a gurantee that a $7.99 phone cable at Target or Walmart would be cheaper at Five Below. With the increased pricing, now we can’t necessarily be so sure–especially if the item could be up to $10 or maybe more eventually. For me, if you don’t know that the price will be cheaper, it almost defeats the purpose in going to Five Below for certain items. That’s just my logic though.

  7. Dollar Tree tried this years ago with $2 products on the top shelves. We see or don’t see how that stayed around.

    Ya little shoched today to buy a phone cord and was $5.55 $6 with tax. Yet months ago was $5 plus tax.Shocking how it was not marked $5.55 in any of the pjhone core isle. The cords always work better then cheap $1 store ones. I seen some blue tooth head phones were learly marked $5.55. I go in thier to buy cheap things like the name says.

    If I want bargins that cost more normally I know what I need and go to Dollar General or where every ust get them. Hard to plan a trip to 5 below just to get $$6-$10 stuff they may or may not have. Much less may have had but gone.

    Just still getting over the sticker shock when checking out. Not so much the $.55 price but how they don’t warn you. So how you know what ia what price. They claimed thier was a spot for the special priced stuff ya right.

  8. Gabrielle Tollerson says:

    people complaon too goddamn much. 10 below is still fairly good! These whiny asses whining about spending “A TEENY BIT More than 5 bucks” need to get a f***ing hobby.

    • Pissed off person says:

      Are you an idiot? It’s not about customers not wanting to buy stuff for $10. It’s about the fact that the store is called 5 below and that’s what they marketed it as. A store that sells everything for $5 less. So yeah, people can complain if they want. You are the whiny ass complaining about people complaining. You need to get a hobby. Troll …

      • I love God... says:

        Greatly put!

      • Agreed the model is the store name but they are passing additional cost right onto the consumer… it was a matter of time. I honestly have no idea about the tariff situation but it is where retail increases … only other options are stay 5 below and end up out of business due too losses in profit it stinks but it is the way to stay in business

    • I love God... says:

      Wow let’s keep it PG.13 You dont have to curse.. All worked up….

      • I went in to 5 below to find some over $5 items. Some $7 and even $10. I felt like complaining but it would do nothing since the employees have no control over it.

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