First, Dollar Tree began introducing a selection of products that cost several dollars instead of just one. Later, it raised its base prices from one dollar to $1.25. Then it started tinkering with additional price points from $1.50 and up. Now it plans to start offering products priced at up to $7, and someday perhaps even more.
So much for “everything’s a dollar”!
The dollar store chain has revealed new details about its latest pricing and merchandising plans for the months ahead. Its highest-priced items will soon hit the $7 mark. And these high-dollar items will no longer be relegated to a special section of the store, instead being integrated into the aisles along with the $1.00 $1.25 items.
“This is the next exciting chapter of the Dollar Tree value story,” CEO Rick Dreiling told investors recently. “New items, more choices and more savings.”
It’s been five years now since Dollar Tree first began offering $3, $4 and $5 items in specially-marked “Dollar Tree Plus” sections of its stores. The idea was not to raise prices on existing products, but to be able to offer new products in new sizes that Dollar Tree was never able to sell before at its standard base price (though Dollar Tree eventually did raise prices on existing products, too, changing its standard base price from $1 to $1.25.) The “multi-price point strategy is doing significantly better than we thought it would do,” Dreiling said. “The customer acceptance has been off the charts.”
So Dollar Tree is doubling down and introducing even more products at higher price points. Prices will top out at $7 – for now – but stores will also feature more products priced at $1.50, $3, $4 and $5, and plenty of prices in between as well. And don’t look for them solely in “Dollar Tree Plus” sections in the center of the store.
“Over time, you will also see us fully integrate multi-price merchandise more into our stores,” Dreiling said. “So our shoppers will find $5 bags of dog food next to our traditional $1.25 pet treats and toys, and our $3 bags of candy will be found in the candy aisle.” The goal, he said, is to “get the multi-price point in the aisle where it belongs, rather than being in the center of the store. We think it’s more shoppable and the consumer will trade up.”
Which is to say, shoppers will see the higher-priced items, whether they’re looking for them or not, and decide to buy them instead of cheaper $1.25 alternatives.
The pricing strategy, “which we’re calling More Choices,” Dreiling explained, is part of Dollar Tree’s effort to appeal to higher-income shoppers with more money to spend. Among Dollar Tree shoppers, “the fastest-growing demographic is north of $125,000 a year in income, which brings a lot more firepower to the store,” he said. “And I think that attraction is the multi-price point, and the fact that we’ve been able to increase the variety of product in the store.”
And it’s not just the number of products that will be increasing, but the number of stores. While Dollar Tree-owned Family Dollar is struggling, and the company recently announced plans to close nearly 1,000 of them, it’s a different story at Dollar Tree. Going forward, “we’re going to shift our focus to opening more Dollar Trees than we historically have done in the past,” Dreiling said.
This year, some 3,000 Dollar Tree stores will begin to introduce hundreds of new products, some of which will feature the new $7 price. And while three out of ten coolers in the typical Dollar Tree store currently feature frozen and refrigerated items priced at $3, $4 and $5, the retailer plans to expand the availability of those higher-priced items to eight out of ten coolers in the near future.
But to shoppers who worry that Dollar Tree is becoming just another dollar store that doesn’t really sell anything for a dollar, Dreiling offered some reassurance. “Even as our multi-price assortment expands over time, the vast majority of the items sold in Dollar Tree stores will remain at our entry-level fixed price point,” he promised.
Of course, that entry-level fixed price point used to be $1, until a few years ago. After decades of consistency at Dollar Tree, it seems the only thing constant today, is change.
Image source: Phillip Pessar 
Seems sort of odd that they are closing many of the Family Dollar stores (which already have items at a variety of price points), while bringing in more pricing levels to the Dollar Tree stores.