The Breakdown You Need to Know:
CultureBanx reported that the average Dollar Tree shopper comes from a household that earns $40,000 or less per year. In 2019, the U.S. Census Bureau released data showing the median income for an African American household was $39,490, putting them right in Dollar Tree’s consumer sweet spot. It’s not just low income shoppers that frequent these dollar stores, customers with household incomes of more than $70,000 claim they also shop at discount retail chains.
Consumer prices have surged up 5.3% in August, with things like the cost of clothes, cars, food all increasing while the global economy emerges from the pandemic. Many companies are passing those costs on to consumers, sending the price for trinkets, food and more higher. Items that can go for $1.25 to $1.50 will soon be found in the mix at some locations amid the typical assortment of $1 products.
“For decades, our customers have enjoyed the ‘thrill-of-the-hunt’ for value at one dollar – and we remain committed to that core proposition – but many are telling us that they also want a broader product assortment when they come to shop,” said CEO Michael Witynski in a statement.
Stretching A Dollar:
Dollar Tree had already begun testing higher prices at several hundred of its nearly 8,000 locations in its “Dollar Tree Plus” section, with items that can go for as much as $5. A J.P. Morgan analyst noted past conversations with Dollar Tree executives who cited a significant sales boost at stores offering a Plus section.
MORE FOR YOU
It’s not just Dollar Tree that’s trying to battle inflation. Fed Chair Jerome Powell said that price increases have worsened amid snarled supply chains and rising labor costs. The accelerating inflation comes as companies have been forced to pay more to secure critical materials.
The Fed wants inflation to be around 2% over the long term. Policymakers insist the increase in prices is going to be short lived or “transitory”, reflecting supply chain snarls and pent-up demand from Americans now happy to spend money on trips or outdoor activities.
Let’s remember that Dollar Tree manufactures about 40% of its products in China, and they must find a way to manage costs. Last month the retail chain stated that rising shipping costs would take a bite of $1.50 to $1.60 out of its per-share profits this year. For an economy finally starting to roar back from the pandemic recession, higher prices pose a major potential risk. What matters most is how committed a national discount chaan like Dollar Tree will keep prices over $1.
Dollar Tree may want to take a page out of one of their top competitors’ playbooks in an effort to make sure sales continue to rise. For example, Dollar General