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For 35 years, Dollar Tree’s enduring promise has been to sell everything in the store for just one dollar. Sometimes package sizes may shrink, or quality may be a little compromised, in order to maintain that price point. But the dollar store chain may finally be giving in to economic reality, by raising prices in recognition of the fact that a dollar just doesn’t go as far as it used to.

Dollar Tree has announced that it will begin “testing additional price points above $1 in selected legacy Dollar Tree stores,” such as $1.25 or $1.50. That’s separate and apart from the “Dollar Tree Plus” sections of some stores, which sell selected items for $3 or $5. This new “test” will involve bumping up some prices by a quarter or two throughout the store, not just a special assortment in a dedicated higher-priced section.

So in the space of just a few years, Dollar Tree has gone from “Everything’s a Dollar,” to “Everything’s a Dollar Except in the Dollar Tree Plus Section,” to “Everything’s a Dollar… and Change.”

The company is putting the sunniest possible spin on its announcement. Dollar Tree is hearing from customers that they “want a broader product assortment when they come to shop,” CEO Michael 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.”

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The careful announcement was accompanied by a pledge not to completely abandon the one-dollar prices that Dollar Tree customers have come to expect. “For decades, our customers have enjoyed the ‘thrill-of-the-hunt’ for value at one dollar – and we remain committed to that core proposition,” Witynski said.

But inflation, shipping costs, labor shortages and other challenges just can’t be ignored anymore. While many other retailers are passing along higher costs to customers, Dollar Tree hasn’t been able to do that – it’s simply making less profit on every item that it sells for $1. And with costs continuing to rise, something’s got to give.

The first moves away from “Everything’s a Dollar” began a couple of years ago when the retailer introduced Dollar Tree Plus, which is now featured in hundreds of stores and will expand to an additional 1,500 stores in the year ahead. Company officials insisted at the time that the move was aimed at introducing new products that Dollar Tree couldn’t sell in the past, not getting shoppers used to higher prices in general. “I just want to emphasize, we’re not raising retails on the dollar items that our folks have come to love and count on,” then-CEO Gary Philbin said. “This is about adding new items and categories… this is not raising items from our $1 price point to a higher retail.”

After Dollar Tree Plus came combination Dollar Tree-Family Dollar stores, which the company started testing last year. The combo stores feature products from both company-owned dollar store chains, at a variety of price points. “These stores represent another way to introduce the multi-price assortment to Dollar Tree shoppers,” Witynski said last month.

But impatient investors have been pressing Dollar Tree to raise prices throughout its stores, for years. In early 2019, hedge fund Starboard Value, one of Dollar Tree’s largest investors, said neither shoppers nor shareholders were benefiting from “Everything’s a Dollar” anymore. “The value that Dollar Tree has offered its customers has deteriorated because of the need to fit everything into a $1.00 price point,” Starboard wrote in a public letter. “Products today are smaller or of lower quality than they were five, ten, and certainly thirty years ago.” While Dollar Tree clung to an “arbitrary price ceiling of $1.00,” Starboard said “other dollar stores and discount retailers have moved away from a single price point approach with tremendous success.”

So it suggested keeping many items priced at $1, with “a few new price points added to stores”, such as $1.25, $1.50, or $2.

More recently, investment bank Piper Sandler Companies warned of Dollar Tree’s “inability to pass through price increases, given its fixed $1-only price point,” while inflationary “pressures are only strengthening.”

While the retailer was willing to test out Dollar Tree Plus, the company’s former CEO resisted raising prices throughout the store. “Customers continue to choose Dollar Tree for the values they are able to get for only $1 for every item,” Philbin said in response to Starboard’s suggestions.

But Philbin retired last year, and new CEO Witynski has been more open to the idea. “Our brand promise is that customers get great value for what they spend at Dollar Tree,” he said. “We will continue to be fiercely protective of that promise, regardless of the price point, whether it is $1.00, $1.25, $1.50.”

The company didn’t say which, or how many, “selected legacy Dollar Tree stores” will feature the new prices. But Witynski insisted that the move is considered a “test,” and that the company will invite feedback from its customers. “We are a ‘test-and-learn’ organization, which is what we are doing with this new initiative,” Witynski said. “We listen to our customers and believe it will make shopping with us an even better experience.”

So watch the prices at your local Dollar Tree, to see if your store is one of those that’s been “selected.” And if you don’t like the higher prices, consider the fact that Woolworth’s, founded back in 1879, managed to sell everything for a nickel or a dime for more than fifty years, until it finally gave in during the Depression-era 1930’s and raised its top price point to 20 cents. Customers weren’t happy, but nothing lasts forever. Times change – and so, eventually, do the prices.

Image source: Dollar Tree

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