Dollar Tree Has Announced a Price Increase.
When a spate of price hikes hits Dollar Tree, the retailer’s moniker will become meaningless. According to a CNN Business article, Dollar Tree notified its shareholders that most of its products would increase by 25% to (dollar)1.25 in the first quarter of 2022. The shift is being blamed on inflation and is “not a reaction to short-term or transient market conditions.” The company’s plain pricing system received bad news in Dollar Tree’s earnings release on Tuesday. It claimed that adhering to the (dollar)1 price tag has already caused it to stop selling several “consumer favorites,” and that the concept is no longer viable. By increasing its costs to (dollar)1.25, the company will be able to reintroduce popular items alongside new ones, as well as test out larger varieties and sizes of products that customers currently prefer.
Dollar Tree also claimed that the price rise will help it boost profit margins by “mitigating historically high merchandise cost hikes,” referencing to supply chain challenges caused by the COVID-19 epidemic. “This is the right time to move away from the confines of the (dollar)1 pricing point,” stated CEO Michael Witynski. Dollar Tree, like other merchants and economists, appears to believe that prices will not return to pre-pandemic levels even after the global supply chain catches up with itself.
Dollar Tree was one of the few remaining true “dollar stores” in the United States, catering primarily to the middle class in suburban regions. It sells everything from cookware and home decor to stationery, seasonal items, and toys at a consistently low price. It has previously deviated from the (dollar)1 price tag in recent years, but it has never experienced such a drastic change in its pricing strategy.
Dollar General and Family Dollar, Dollar Tree’s competitors, have already experienced price rises that appear to contradict their names. Dollar General, according to CNN, caters more to rural areas than Dollar Tree, but Family Dollar is usually found in cities. Family Dollar is still owned by Dollar Tree.
Dollar Tree’s argument that this was not a reactionary price increase was questioned by CNN’s economic commentator Kelly Bania. “The rate of deployment, as well as [the]active investor, Mantle Ridge, obviously says otherwise,” Bania said. Customers expressed their concerns via social media comments and postings.