A fistful of Dollar Trees
There is some big news coming out of retail this week, and it seems to have flown under the radar. Typically, around Black Friday and then the Christmas season, consumers start eyeing down their holiday gift ideas and begin to fill their shopping carts in hopes of seeing price decreases so they can snap up a good deal. In the current environment, it doesn’t look like those good deals are too widespread and it looks like the last bastion of good deals has finally succumbed to the increased price pressure.
Dollar Tree (NASDAQ: DLTR) which, as its name clearly suggests, has been the consumers’ last resort for getting those small knick-knacks, birthday cards, kitchen accessories, and everything in between all starting at just $1.00 USD. For me personally, I always tend to end up there when I am looking for something funny to put into a family member’s stocking for the holidays and it has never let me down. However, this year the company has announced that it will be raising its starting price to $1.25 USD.
It may not seem significant but at the end of the day, that represents a 25% price increase which is certainly an insight on the companies’ bottom-line being affected by price increases due to inflation. For a company that does the type of volume as Dollar Tree, this move is quite smart. They typically do not serve a base of consumers that buy a significant enough quantity for this increase to actually be felt. Most people walk out with under 5 items, which means that the total cost increase on the receipt for the average customer will be just about $1.00 USD. Most customers won’t think twice about this, however, in the aggregate, Dollar Tree will be increasing its revenues by 25% and almost no one will feel the effect.
Imagine a company trying to do something like that in the new car market – a price increase like that would surely drive away a significant number of customers as the increase would amount to thousands of dollars rather than just a few cents for a single unit sale. Even though the percentage increase works out to be the same, the reality is just that the small notional amount increase is much more palatable, if even noticeable.Of course now the most important question is how can they sleep at night still calling themselves Dollar Tree. Of course “Dollar and a Quarter Tree” doesn’t work as it just doesn’t roll off the tongue. “Five quarters Tree” is a little too on the nose which is why I am offering my rebranding idea to change the name to “A Fistful of Dollar Trees”. Who knows, maybe they can even do a collaboration with the Dollar Trilogy’s “man with no name” character, as they appear to both have similar identity problems at the current moment.