Is a dollar store still a dollar store if most of its products cost more than a dollar? With inflation creeping up, discount chain Dollar Tree announced it’s going to start raising some prices and carrying more items that cost $1.25 or $1.50, as part of a test.
The first Dollar Tree opened in 1986. Back then it was called Only $1. And that 1986 dollar is worth more than $2 today. John Strong, a retail professor at William and Mary, said the discount chain has been faced with “how do I find ways to purchase products that I can sell at a dollar.”
Generic brands and smaller packages work, but only work for so long. By charging more than a buck, Strong said Dollar Tree will be able to stock items with higher profit margins.
John Zhang researches pricing strategy at Wharton. He said dollar store customers are price sensitive. They’re also loyal.
“I think that Dollar Tree in this particular case just means that it is a cheap store,” he said.
Dollar Tree plans to open 1,500 traditional stores next year, and 5,000 locations of Dollar Tree Plus over the next few years. Items there cost up to $5. Zhang said the company could have a branding problem.
“It would be really interesting if later on they change their Dollar Tree as Dollars Tree,” he said.
Dollars Tree? Doesn’t quite have the same ring to it.
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