It ain’t $1.25 Tree!
Maybe you shouldn’t make promises you can’t keep!
SOURCES
https://www.the-sun.com/money/13875778/dollar-tree-ceo-prices-hike-store-value/
Dollar Tree is raising prices again and shoppers are not happy
https://www.usatoday.com/story/money/2026/07/22/dollar-tree-price-scanners-social-media-reactions/91013233007/
https://financebuzz.com/news/sneaky-ways-dollar-tree-changed-prices
https://www.the-sun.com/money/14719523/dollar-tree-sneaky-cost-change-price-increases/
https://www.forbes.com/sites/pamdanziger/2026/02/27/five-below-rises-above-the-dollar-store-image-and-shoppers-are-all-in/
https://www.the-sun.com/money/16112163/five-below-major-changes-openings-updates/
https://www.the-sun.com/money/16077581/dollar-general-new-store-remodel/
https://www.businessinsider.com/family-dollar-spoiled-products-reveal-a-big-challenge-for-sale-2024-6?op=1
https://www.lawyerherald.com/articles/52431/20240227/family-dollar-stores-llc-admits-guilt-fines-total-41-675.htm
The Marketing Gateway is a weekly podcast hosted by Sean in St. Louis (Sean J. Jordan, President of https://www.researchplan.com/) and featuring guests from the St. Louis area and beyond.
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TRANSCRIPT:
So the retail chain Dollar Tree is having a … moment right now, and not a good one. And look, I don’t want to go into a lot of detail here about the really salacious news story that’s going around, but let’s just say that Dollar Tree has attracted some unfortunate attention recently from the darkest corners of the internet and leave it at that.
Let’s instead talk about how the Dollar Tree brand, which has famously been used to successfully run an “everything’s a dollar” retail store chain for many years, is working overtime to undermine all that hard work by continually raising its prices.
It started out with Dollar Tree stores marking most items up to $1.25 in 2022, which is, I guess, reasonable due to the cost of goods going up during the pandemic. Even so, in the old days, you could shop at Dollar Tree knowing $5 would get you five items. At $1.25, that means instead of getting five items for a $5 spend, you get four.
But then they hiked it again to $1.50 on many items last year – three items for $5.
Then prices went up to $1.75 on many items in February of this year, which means less than 3 items for $5 – you’ve now got to spent an extra quarter to get that third one.
Dollar Tree started also started rolling out $7 items for select premium items in 2022, and it’s slowly been marking up other items to $3, $4 or $5 and then $10.
The weird thing is, the executives at the top of the organization keep talking about how pleased they are with the changes they’re making in transforming Dollar Tree into something it hasn’t been before. But many customers themselves seem to be annoyed.
The difficulty of understanding what things cost has certainly make it harder to know how far your dollars can stretch in a store where it used to be easy to figure that out, and the rising prices have prompted many online content creators to go into the stores and film themselves reacting to price increases, which are apparently easily spotted by looking for red price tags.
Dollar Tree’s not a store I got to very often, and one of their problems, according to statements they’ve made to shareholders, is that their average customer has generally been a low spender who’s either looking for some cheap items for a particular need or who is trying to stretch their budget as far as they can while they still have money in their pocket.
These are often not routine customers, and Dollar Tree’s biggest weakness as a brand is in being a retailer you go to for cheap stuff rather than a place most people love to shop.
And I think a lot of the problems Dollar Tree is facing is what happens when a brand that’s known for a promise like “everything’s a dollar!” breaks that promise to consumers… and is there any way they can make things right after they do?
And why is Five Below, another discount retail chain, doing so well right now despite breaking the very same promise?
I’m Sean in St. Louis, and this is the Marketing Gateway.
So as I mentioned, there’s another discount chain that’s pretty popular now called Five Below, and over the last 20 years, they’ve expanded into almost every state with nearly 2,000 locations. The original idea of the store was that everything’s $5 and below, but if you go in there today, you’ll see a lot of products that cost more than that.
You’d think consumers would have had a fit about this, but no – they’ve actually loved seeing Five Below offer a selection of premium products for prices about that $5 threshold.
And a lot of it has to do with the way the store’s positioned itself. Five Below has long positioned itself as being a friendly option for kids and families who want low-cost options for gifts, electronics, beauty products, stationary and snacks, and most of what they offer in their store stays true to their goal of keeping things in the $1-$5 price range.
But I’ve also seen items in the $30-40 range at Five Below – usually electronics or outdoor game sets or things like that. The key is that they’re not items that used to cost a lot less and which are now seeing a price increase. Instead, Five Below rolls them out as limited time deal items that are available in limited quantities for special low prices.
And consumers aren’t naïve or stupid – they often can recognize that they’re paying less for these items than they might elsewhere, and so they’re not feeling ripped off when they purchase them.
Five Below has also put a significant investment into its shopping experience by replacing slow cashier lines with self-checkouts, boosting the visual appeal in stores and generally working hard to make their locations feel upscale rather than focused on cost-conscious consumers. They also are transparent that prices are going up due to tariffs and supplier issues, and they aren’t generally perceived as being sneaky about price increases.
The result is that customer goodwill is high, Five Below is opening new stores and the kids, moms and young adults who frequent the store actually believe the executive leadership when they say they’re working hard to deliver value.
All while breaking their initial brand promise of offering items for $5 and below.
Let’s pause for a moment and think about how and why they could pull this off while Dollar Tree has been struggling, because it’s fundamentally the same problem.
Both stores are positioned to appeal to consumers who don’t have a lot of money to spend.
Both specialize in offering a mixture of closeouts, special buys and low-cost everyday items to provide their customers with the strongest value.
And both built their initial pricing strategy into their name but had to pivot when inflation caused that strategy to stop working for them.
The difference in how this shook out can almost entirely be attributed to communication.
When Dollar Tree first raised prices to $1.25, it definitely was a shock to the system that made headlines in many publications both online and offline, but you know what? People were generally on board with it because they recognized that the slight increase in cost meant they could receive the same basic quality of products they were accustomed to buying.
Consumers are often price-conscious, but they are generally reasonable in understanding that prices have to go up every now and then to match costs. And Dollar Tree’s distinctive quality – that consumers could load up on inexpensive items without worrying that they were paying more than they wanted to – was still part of the brand.
Where Dollar Tree has gotten itself in trouble is by raising prices in ways that are highly visible to customers, but which don’t feel transparent.
They’re not communicating a strategy or a purpose behind these increases like they did for the ones that happened in 2022, and so consumers are presuming that they’re doing it out of greed or exploitation rather than necessity.
Dollar Tree’s communication to its customers has seemed tone deaf and disinterested in the economic hardships that are driving customers to shop at a dollar store in the first place, and public statements made about chasing more affluent customers to increase their spend aren’t helping things.
The people who need to shop at Dollar Tree feel exploited and unheard, and the people who shop at Dollar Tree for occasional low-cost purchases are annoyed because they aren’t saving as much money as they used to.
It’s always tough to be the low-cost provider because that strategy isn’t usually sustainable for the long-term. And in fact, a classic phenomenon called the Wheel of Retailing, which was proposed by Malcom McNair back in the 1950s, suggests that low-cost innovators are destined to become mid-level or even premium providers as they upgrade service and merchandise over time and have to charge more to cover their costs. Under the Wheel of Retailing theory, Dollar Tree could one day follow in the footsteps of Walmart by offering actual premium products alongside its everyday low-priced items and sale items.
And lest you think that’s a far-fetched idea, that’s exactly the strategy competitor Dollar General is chasing right now as they attempt to upgrade their store experience and offer more “gotta have it” treasure hunt items that are meant to get customers excited about shopping there.
But there is a difference between Dollar General and Dollar Tree, and it’s how their brands have been positioned. Dollar General has never been an “everything’s a dollar” store, but it’s always been a discount chain carrying a wide variety of goods.
Dollar Tree, by contrast, had a chain like that called Family Dollar, which they acquired after activist investor pressure back in 2014. Last year, they divested from Family Dollar and closed a lot of the stores because the chain was losing a lot of money due to cost-cutting measures in its logistics and warehousing making its products undesirable and even unsaleable.
Ultimately, in 2024, Family Dollar had to admit fault for an FDA warehouse inspection so bad they wound up being fined over $41 million for the rodent infestation their negligence created.
So I’d suggest Dollar Tree wouldn’t be well-served by chasing that Walmart strategy, because they clearly aren’t cut out for it.
But look. People need cheap stuff sometimes. They need to be able to go to a store where they can buy inexpensive stationary and household goods and hair products and mylar balloons and giveaway items for birthday parties. There are also people who are struggling financially and for whom dollar stores offer access to inexpensive food or treats.
Dollar Tree can continue to serve that segment with low prices. They just need to reposition what their brand stands for, and they need to communicate what their values are going forward.
My suggestion would be to focus on the fact that they’re trying offer the lowest prices possible to save you money – putting dollars back in your pocket – and then to offer a special promotional section where attractive products really, truly are just $1. This would draw people back into the stores for the same sort of “treasure hunt” that Dollar General is going after, but it would be more in line with the bottom-line pricing Dollar Tree is known for.
I would also recommend that Dollar Tree employs a stronger segmentation strategy instead of chasing a core customer. My guess is that they have four or five different segments of customers who shop at their stores. Without seeing any data and just going off my own experience, I’m going to say those segments are probably low-income customers, bargain hunters, moms and kids, teachers and maybe birthday party planners.
Each of those groups goes into the store with a different mission and expects different things from the brand. Does Dollar Tree understand those segments enough to serve them with the right products?
Do those customers have expectations that need to be met for them to return?
Are they marketing to them in a way that gets them to come back to the store and spend more next time?
Dollar Tree might be better-served by focusing less on pricing and more on carrying products these five segments want at as low of costs as possible.
Again, lest you think this is impossible, we have another discount store near my office called Daiso, and it specializes in selling Japanese dollar store-style products. The pricing is really good, but it’s also a little confusing because nothing’s marked in US Dollars – it’s all in Yen! They have charts around the store to help you understand what the prices are, but this layer of abstraction actually makes it easier to focus on the products and worry about the costs at the register.
But everyone I’ve talked to who’s been to Daiso loves the experience. It’s upscale, clean, interesting and fun. The store has its own corny Japanese theme song that plays over the speakers and lots of products you won’t see anywhere else.
Dollar Tree doesn’t do anything like that. They’re still very rooted in a business model and brand promise that used to work, but which don’t anymore, and as a result, they’re losing customers who feel marginalized, unheard or even betrayed.
And that’s perhaps their biggest opportunity right now – to rethink that brand promise, to settle on something people actually want, and to stick with it for awhile.
Because if there’s one thing we Americans pay attention to, it’s a cautionary tale about a failed business, but it’s not because we like to see people fail – it’s honestly because we all love to hear a comeback story blossom out of it.
So good luck, Dollar Tree! And if you need some experts in marketing and branding, just check out some of the incredible guests who’ve been on this show. We’ve got your back.
I’m Sean in St. Louis, and this has been The Marketing Gateway. See ya next time!
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