Dollar Tree CEO has great news for cash-strapped consumers

It used to be that dollar stores had a certain reputation — namely, that they were for income-constrained households or people down to their last $20 dollars in their bank accounts.

But in today's economy, dollar stores aren't just for budget-conscious customers.

There's been a shift toward middle- and even higher-income shoppers spending their money at dollar stores as the heavy toll of inflation continues to chip away at salaries across all ranges.

Inflation began to tick upward in 2021 when generous stimulus policies left Americans flush with cash at a time when supply chains had started to experience bottlenecks.

Since then, discount chains like Dollar General, Dollar Tree, and Five Below have seen an uptick in shoppers with higher incomes, according to CBS News, citing findings from GlobalData Retail.

Specifically:

• 59.2% of shoppers earning $56,501 to $169,750 are shopping at dollar stores.
• 27.5% of shoppers earning $169,751 and above are shopping at dollar stores.

The problem, though, is that some dollar stores have stopped living up to their name. And that’s been putting pressure on consumers who rely on those lower price points. 

Dollar store prices are going up

As the U.S. economy was in the process of recovering from the Covid pandemic, Dollar Tree caused an uproar by announcing an increase in prices. Since then, it's made additional changes that have left consumers pretty unhappy.

A timeline of Dollar Tree's pricing strategy

• 2021: Dollar Tree raises its base price to $1.25.
• 2023: Dollar Tree announces a $5 price cap on many in-store items.
• 2024: Dollar Tree expands inventory to include items priced from $1.50 to $7.
• 2025: Dollar Tree sneakily raises prices on key items from $1.25 to $1.50.

Of course, there's a reason why retailers like Dollar Tree are raising prices — they have to in order to keep up with inflation. Not only has the cost of sourcing goods increased, but labor and logistics costs have also risen.

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But this creates a real problem for consumers on a budget who now need to shop very carefully at retailers like Dollar Tree. 

As one Reddit user recently complained, "I knew as soon as they started bringing in the two and three dollar items that it was going to snowball."

Another Redditor joked, "Wait till they gradually change their name to 'Dollars Tree.’”

But behind that quip is a real problem. 

Many consumers can no longer afford to stock their homes with basic necessities and put food on the table. So if Dollar Tree fails to live up to its name, it puts many people in a truly terrible spot. 

Dollar Tree pledges to stick to its roots with lower prices on most items

Dollar Tree has certainly gotten its fair share of negative feedback in recent years as prices have seemingly gone nowhere but up. But the company says it's committed to upholding the lower prices consumers expect. 

As CEO Michael Creedon said during the company’s most recent earnings call, “We still have 85% of our stores at $2 or less. Think about that. You walk in and you're finding value around every corner. We think our customer is really pleased with that.”

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That said, Dollar Tree is unlikely to return to its roots anytime soon. Creedon made it clear during the aforementioned earnings call that Dollar Tree’s management team feels its range of price points is benefiting consumers, not hurting them.

“Expanding our assortment to include items at a variety of price points is fast becoming the standard Dollar Tree model,” he said. “It enhances our flexibility, whether through larger pack sizes, better quality items, or entirely new categories. The ability to shop for a $1.25 snack and $3-$5 home decor items in the same trip makes Dollar Tree more compelling than ever.”

Of course, cash-strapped consumers may not quite agree with that sentiment. People who can barely afford toothpaste aren’t impulse-buying $5 throw pillows at Dollar Tree. 

But Dollar Tree’s strategy certainly makes sense, given the shift toward higher-income consumers who have been shopping there. If the company is able to keep the bulk of its inventory affordably priced while expanding into more categories to cater to its newer audience, it could boost profits in a very meaningful way.

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