Benjamin Franklin once said that nothing is certain in this world except death and taxes. For the past 35 years, Americans could add one more certainty to the list–every item at the Dollar Tree has a $1 price point.
But in the inflationary world we’re living in, Dollar Tree can no longer keep its one-dollar promise. The retail chain has announced that for the first time in more than three decades, they are officially raising their price point to $1.25.
Dollar Tree Has Been Testing New Price Points And Concepts
According to Retail Dive, Dollar Tree started testing higher price points at their legacy stores this past fall. They also started expanding their Dollar Tree Plus concept, which offers various products at three different price points—$1, $3, and $5.
The price increase didn’t scare customers away, though. With prices skyrocketing on everything from gasoline to aluminum cans, shoppers have been seeking out the value offered at the discount retailer.
In an interview with Retail Dive, CEO Michael Witynski said that the company had a strong finish to the third quarter, with sales increasing 3.9% from last year to $6.4 billion. But at the same time, cost pressures in this inflationary environment led to a staggering 33% drop in the company’s operating income.
‘The Time Is Right’
In their earnings release statement, Dollar Tree said that the time is right for this historic shift in the company’s pricing strategy. With increased freight and supply chain costs–and a higher cost of goods sold–they said now is the time to raise prices from $1 to $1.25.
“For 35 years, Dollar Tree has managed through inflationary periods to maintain the everything-for-one-dollar philosophy that distinguished Dollar Tree and made it one of the most successful retail concepts for three decades,” the earnings release revealed.
“However, as detailed in its September announcement, the Company believes this is the appropriate time to shift away from the constraints of the $1.00 price point in order to continue offering extreme value to customers.”
No Going Back
For anyone who thinks this price increase could be temporary due to current market conditions, the company says that’s not the case.
Even though they are facing up to $200 million in extra freight costs amid the global supply chain bottleneck, Dollar Tree claimed their price increase is not a reaction to short-term market conditions. This change is permanent.
Dollar Tree also pointed out that the price increase will allow them to introduce new products and sizes, which will provide families with more of their daily essentials.