With the competitive retail environment, Dollar Tree is raising prices on several items.
“Over the past several weeks, we have begun to implement price increases to take into account the increased cost of purchasing commodities as well as the cost to acquire and deliver to our stores,” company spokeswoman Valerie Fox told Business Insider.
In a statement to investors earlier this month, Dollar General said the rise of e-commerce is contributing to “increased freight costs for transportation, logistics, and distribution.”
It wasn’t just the large package of food items. Prices were also rising for packs of toilet paper, cookies, and lollipops.
“Transportation costs have increased year over year for most food products. This is due to increasing delivery rates, increasing fuel costs, and the overall market for the commodities that we purchase,” Fox told Business Insider. In the company’s release, CEO Gary Philbin said customers should expect to see “transportation and distribution costs further pressure margins.”
Dollar Tree, which acquired Family Dollar in 2015, now has more stores in the US than Dollar General.
Dollar Tree has already announced plans to have 500 “Dollar Tree Plus” within the next year – offering an assortment of value-priced $1, $3, and $5 products.
What is a Dollar Tree Plus store?
In addition to being a close-out selection of discounted merchandise, a Dollar Tree Plus store will also be stocked with a higher-quality assortment of items. This includes national brands, such as 8th Wonder LLC (the parent company of Haagen-Dazs), and a broader assortment of products. Both brands are priced under $3, and their shelves will be stocked with other popular brands, including Dannon, 7UP, and PepsiCo’s Mountain Dew, Doritos, and Snickers.
The Dollar Tree Plus stores will also offer apparel and accessories, as well as household goods.
Dollar Tree Plus stores will not be identical, though – and they are differentiated by the merchandising mix at each location. For example, a Dollar Tree Plus store in the New York City area may feature more apparel, while a dollar store in the Midwest may have more grocery and household goods.
Will every Dollar Tree store raise its prices?
Not necessarily. The exact price changes that will be implemented in all Dollar Tree stores will vary. Many stores have gone to a $1.25 price point. This seems to be the largest price test affecting the largest number of stores.
The company has tested a $3 price point on fresh produce at its Dollar Tree stores in Dallas.
Most Dollar Tree stores are located in middle-income neighborhoods, with an average household income of about $49,000 per household.
This demographic is the group of Americans who are more likely to be affected by Dollar Tree’s pricing experiments.