Why Dollar Tree Plus Makes Dollar Tree a Better Store

For the longest time, Dollar Tree was all about one thing. Really cheap stuff. Dirt cheap stuff.

Everything at Dollar Tree was a dollar. Everything. (Okay, almost everything: greeting cards were even cheaper.) You didn’t have to worry about price tags, because you knew exactly what you were paying each time. It was a radical approach, one so bold that it carried its own industry title.

Dollar Tree was an extreme discounter.

Want $1 snacks? You could find them. Need $1 toiletries? Yep, those too. Looking for a $1 movie? Yes, even that.

Every business approach carries risks, and being an extreme discounter is one of them. You almost assuredly have to sacrifice quality, because there is a limit to how much quality you can afford to put in a $1 product. And you have to sacrifice selection, because there’s plenty of stuff you can’t remotely sell for $1. The end result is a store with a lot of cheap … stuff that lacks much in the way of diversity or variety.

There is another problem. Inflation.

Now, inflation is relentless. The value of money goes down over time, and prices go up. You can’t buy many homes for $30,000 like you did in 1980, or pick up a movie ticket for a nickel like you could a century ago. Most people don’t like inflation — although, because wages go up, it does make loans easier to pay off — but it’s unavoidable. (And its opposite, deflation, is usually the sign of a major problem.)

When you’re an extreme discounter, inflation presents a huge challenge. Do you hold the line on price, and possibly cut corners in quality or quantity? Or do you raise prices to maintain a profit? Either choice is fraught with problems. We’ve seen it: Dollar Tree ended up doing a bit of both. As a result, the store raised prices on everything to $1.25 while also engaging in some shrinkflation. That might help eke out a profit, but inevitably it’s going to shrink the product line. That’s not a recipe for happy consumers.

Enter Dollar Tree Plus.

Over the last several years, Dollar Tree has been slowly integrating a new line of products into its stores. These products are $3 and $5, and as such extend the store’s variety considerably. Where once there was just the really cheap stuff, now there are products that — if not deluxe — are still bigger and more interesting than the $1.25 goods.

We think this is the best way forward for Dollar Tree.

Being an extreme discounter with a single low price point is a cool niche that can capture some attention. On the other hand, it fails to give customers the one thing they really want: selection. Shoppers don’t just want bargain basement products: they want to be able to get what they need … or, at least, what they think they need. Adding $3 and $5 products builds out the store inventory in a way that lets people have more selection.

And, I suspect, shoppers will react to that. They’re already used to cheap-but-not-extremely-cheap products at other dollar stores, and adding a sort of Five Below element to Dollar Tree will only make it more intriguing to would-be consumers. We’re already impressed with some of the unique stuff making the rounds in the Plus section of the store. In our view, it makes Dollar Tree a more interesting competitor to archrival Dollar General.

We can’t wait to see what else shows up in the Plus aisles.