Dollar Tree has angered millions of shoppers with $1 price hike

Image copyright Getty Images Image caption Dollar Tree now has more than 10,000 stores in the US and Canada

For customers in the UK, this comes as the start of the ‘weekend’ saving – but it’s also going to hit the pockets of thousands more Americans, including many retirees.

As part of its most recent price increase, Dollar Tree will raise the price of everyday items by as much as $1 – including food, toiletries and cleaning products.

The move follows a similar move by its larger rival, Family Dollar.

The moves are part of a broader price hike that could be the “worst decision” in retail history, according to one industry analyst.

Increasing prices

Clothing and beauty items have already been priced at $1 while food items such as potato chips, coffee and tomato sauce have also been changed to the $1 mark.

“It’s almost like selling life insurance with a face value of a dollar. You can only increase the price until the client or customer says, ‘I’m not going to take it anymore’,” said Shiv Kapoor, senior vice president of strategy and engagement at market research firm Customer Growth Partners.

Image copyright Getty Images Image caption Dollar Tree is the fourth-largest American retailer, with the largest market share in its sector

The customer reaction has been “incredibly positive,” Dollar Tree spokesman Dan Florizone said, adding that “it’s the same trend we saw when we started introducing supercentres in the 1990s”.

While the change will affect people outside the US, it is the customers in the US who are set to feel the impact, The Wall Street Journal reports.

“At least some of the volume that we generate will leave the country” as people ditch the product, said Mark Mulligan, an analyst at Stephens Inc.

Troubling trend

Share your thoughts

We want to hear your thoughts about price increases in retail. Tell us about a time you were unhappy with the price your shopper paid and how you resolved it. Do you know any cases of massive price rises without corresponding improvements in quality?

Contact: [email protected], via Twitter @bbctellus, or Facebook

The move “is a classic product mix shift” to impulse buying, which attracts shoppers when they have time or money to spend, Mr Mulligan said.

There are around 10,000 Dollar Tree stores in the US and a further 2,500 outlets in Canada, which formed Dollar Tree when the company was known as Family Dollar.

The parent company has not yet announced any plans to match the increase in value for products.

It “depends on market conditions and product mix” when deciding whether to match the price increases or “not”, Dollar Tree said.

Despite the increase, the big US discount chain’s revenues in the three months to the end of October were up 13.4% at $4.14bn (£3.2bn).

The prices do vary by store, but some items are free to customers who already visit at least one location.

Aside from its well-known name, Dollar Tree has also courted controversy by stocking products that would not be considered normal in some parts of the UK.

For example, it sells food items that were once defined as “foods unfit for human consumption” in the UK – a position many retailers take as a consumer protection policy.

Dollar Tree’s chairman and chief executive Gary Philbin has said “I would encourage customers in these markets that come to visit us that we’ve got some items here that they can enjoy that were once considered common food products”.

What about food retailers?

Prices at dollar stores are often cheaper than at supermarket chains such as Tesco, because they have more impulse buying options and staff that are better able to guide shoppers.

Unfortunately for some shoppers, though, there may be a shelf in the local dollar store or Supermarket that has items included in that argument.

And after years of bucking the trend and never matching the rise in grocery prices, Tesco has recently been thinking of cracking that barrier, by offering shoppers discounts on everyday items.

Despite that, the grocer said there would be no “big increase” in prices to get ahead of any rivals.

Leave a Comment