Dive Brief:

• At its annual investor conference last week, Dollar Tree outlined its strategy to offer products that cost up to $5 across thousands of stores. 
• The discount retailer noted that “breaking the dollar” — moving its primary price point up from $1 to $1.25 — has helped improve comp sales as well as allowed the company to expand its product selection. Now, the company is moving into $3, $4 and $5 items in categories like frozen foods, bread and general merchandise.
• This uptick in prices has boosted baskets for the company, but comes as consumers continue to feel the effects of record-breaking inflation. 

Dive Insight:

Dollar Tree is pushing well beyond its namesake price point as it looks to boost consumer spending and round out its shopping experience. 

The discount retailer began piloting products at $1.25 in 2019 and last year expanded that selection to 2,500 stores and four distribution centers, according to a company presentation. By the end of this year, Dollar Tree’s “multi-price” strategy will be on display across 4,300 stores.

Part of that plan includes pushing into $3, $4 and even $5 merchandise in discretionary as well as food categories. 

“From $2.01 to $5 [price points], there’s another huge market that is untapped for us,” Rick McNeely, Dollar Tree’s chief merchandising officer, said during the conference. 

When offering consumables for $1.25, Dollar Tree has been limited to “single serve or a novelty offering,” McNeely said. By moving to the $3, $4 and $5 assortment, the discounter is able to stock meal solutions, add protein and offer branded ice cream, creating a more complete shopping experience at Dollar Tree, he added. 

In May, Dollar Tree piloted refrigerated items at the $3 price point at 140 store locations and saw significant comp growth. Dollar Tree has also piloted $3 packaged bread and $5 ice cream in hundreds of stores.

Currently, Dollar Tree’s frozen setup in stores participating in its multi-price program consists of seven doors offering products for $1.25 and three doors offering products at $3, $4 and $5. By 2025, the retailer plans to have two doors remaining at $1.25 while eight doors will be stocked with goods marked at $3, $4 and $5. 

While the multi-price assortment will continue to grow, McNeely noted that roughly 300 to 400 products will return to costing just $1. He added that Dollar Tree will continue to try and communicate its pricing strategy to customers.

Dollar Tree received backlash from its customers when it initially pushed past the $1 price point, but during the company’s most recent earnings call, CEO Rick Dreiling said that “any backlash on that is behind us.”