- Dollar Tree said Tuesday that it is adding $ 1.25 and $ 1.50 price points in some stores.
- Until then, it was the last major dollar store chain to stick to a $ 1 price cap.
- The news signals the death of the traditional dollar store concept in the United States.
Dollar Tree, the last of the major dollar store chains to sell items for $ 1 or less, announced Tuesday that it is officially “breaking the buck” by adding $ 1.25 and $ 1.50 price points in some stores.
The news sent its stock price soaring as investors saw increased sales growth without limiting $ 1 pricing. It also signaled the end of the true $ 1-and-under store concept in the United States.
Dollar stores have existed in the United States for decades and began to pick up speed in the economy after World War II. While these stores began selling products for $ 1 or less, most were quick to diversify and raise prices in line with inflation. But Dollar Tree did not.
Dollar General, the largest dollar store chain in the United States by store count, opened its first location in 1955. Created by father-and-son duo JL and Cal Turner, their idea was to replicate “Dollar Days” sales found in department stores in Nashville and Louisville this year round.
According to Cal Turner’s son, it did not take long for prices to creep up. Today, the chain offers most private label and national brands for $ 10 or less, and only a small portion of the store is set aside for $ 1 items.
Similarly, Dollar Tree-owned Family Dollar, which began selling items under $ 2, has since moved to a $ 1 to $ 10 price point format.
West Coast chain 99 cents Only faced lawsuits from customers after it rose its peak price to 99.99 cents in 2008 due to inflation. These customers claimed that it was misleading given the name of the company.
As these chains raised prices, Dollar Tree (originally called Only $ 1.00 before a name change in 1993) stood by its promise, even as investors piled up pressure to add new price points.
The biggest change in strategy so far came in 2019, four years after Dollar Tree bought Family Dollar when it began testing items at a lower price in a small number of stores. The range, called Dollar Tree Plus, included $ 3 and $ 5 items – similar to what shoppers can find in a Family Dollar store.
The change came after activist investor Starboard Venture challenged the store’s commitment to price $ 1 in a letter to former Dollar Tree CEO Gary Philbin.
“Dollar Tree has kept its prices at $ 1.00 since its founding thirty years ago,” Starboard wrote in 2019, “despite the fact that $ 1.00 in 1986 is worth about $ 2.30 today due to inflation.”
Bu today’s inflationary pressures and rising freight and labor costs have made it harder for the Dollar Tree to stick to its $ 1 price point. CEO Michael Witynski admitted in a call with investors in August that the company is more “sensitive” to these costs because of its $ 1 promise.
Witynski promises that customers will still get “great value” at Dollar Tree.
“We will continue to be fiercely protective of this promise, regardless of the price point, whether it is $ 1.00, $ 1.25, $ 1.50,” he said Tuesday.