By Nathaniel Meyersohn, CNN Business
Updated: Sun, 16 Jan 2022 20:23:25 GMT
Source: CNN Business
"I am not happy!"
"Does NOT sit right with me."
"Sick to my stomach."
Dollar Tree's recent decision to end $1 prices after 35 years and raise most items at stores to $1.25 has elicited an angry response from many loyal customers on Twitter, Facebook, TikTok and YouTube.
Video bloggers with hundreds of thousands of followers posted videos of their reactions to the price hike — or entering a store for the first time and seeing Dollar Tree's ubiquitous green and yellow "Everything's $1" circles replaced with $1.25 signs.
Some shoppers have started derisively calling the chain "$1.25 Tree" and say it should change its name.
The criticism highlights the risks that Dollar Tree — the last of the big dollar store chains to actually sell nearly everything for a dollar — took when it abandoned its $1 brand identity.
"I wish they wouldn't have done that because most of their shoppers are people who are not getting paid a lot of money," said Leniza Costa, a beauty influencer in Pawtucket, Rhode Island, who is "known for always going" to Dollar Tree.
Costa won't shop at Dollar Tree as often and instead will look to purchase $1 items at Walmart.
"This is the worst time to increase the price, when everything else is so much," she said.
We won't know for certain whether customers are turning their backs on Dollar Tree's new prices until it reports its quarterly results in the coming weeks. But there are signs the move may be alienating some shoppers.
A weekly online survey of around 500 consumers by Coresight Research, a retail research and advisory firm, found a 6.2% drop from December 27 to January 3 in the number of customers who said they had bought non-food items at Dollar Tree compared to the prior two weeks. A steeper decline of 12.2% was recorded among shoppers ages 45 to 60. Other chains, including Walmart and Dollar General, did not see similar drops in the surveys.
Dollar Tree added the $1.25 prices to more than 2,000 stores in December (it has around 8,700 US stores), and Coresight said in a report that its "decline in shopper numbers appears to coincide with its price hike." The firm cautioned against an "overreliance on a single week's data point," but said the latest figures "may reflect a shopper exodus on the back" of the price change.
"We have had a very positive response from the overwhelming majority of our customers around the $1.25 price point and the extreme value and broader product selection it has enabled, especially in these inflationary times," a Dollar Tree spokesperson said in an email. "We look forward to providing more details on this initiative during our next earnings call."
The $1 price was almost sacrosanct to Dollar Tree, which sells toys, home furnishings, kitchenware, holiday decorations, stationary, party supplies, arts and crafts, books, food, household essentials and other items.
Macon Brock, a Dollar Tree founder, said in his 2017 autobiography that "I viewed the dollar-only concept as sacred. It was everything. Without it, we'd be just another discount retailer."
"Ditch the dollar, I believed, and we'd surrender our niche," he wrote.
As recently as August, Dollar Tree chief executive Michael Witynski said the company was committed to $1. "This dollar price point is going to be more important than ever," he said on an analyst call.
Selling everything for $1 was also easy on Dollar Tree store operations. Workers didn't have to constantly spend time changing price displays in aisles or tags on shelves, and it was simple for customers on tight budgets to keep track as they shopped.
Dollar Tree raised prices because its business was pressured by having to keep everything under $1. Labor, transportation, fuel, merchandise and shipping costs have surged, squeezing the company's profits.
Some merchandise also suffered as a result of the $1 strategy. The chain had to discontinue several "customer favorites," the company said in November, particularly in packaged and frozen foods. Raising prices will give Dollar Tree flexibility to reintroduce those items, expand its selection and bring in new products to draw customers, according to the company.
Dollar Tree had started selling items at $1.25 and $1.50 at some stores and said it got positive positive customer feedback on the test, leading the company to announce in November that it will move to $1.25 at all of its stores.
On December 12, in response to an activist investor pushing for broader changes at the company, including nominating an entirely new board of directors, Dollar Tree's board said the price hike has been successful thus far.
The performance of stores with $1.25 prices "continues to validate our earlier tests and demonstrates the success of the Company's strategy and execution," the board said in a statement. The board said the move to $1.25 "was not a decision the Company took lightly, and required careful planning, including to ensure that it continues to provide a meaningful assortment with extreme value" to shoppers.
But some retail analysts have said the decision was rushed, jeopardizes the brand's image and will lead shoppers to turn to competitors such as Dollar General, which sells around 20% of its products for $1.
The price change "saddened" the Scent Maven, a video blogger who posts about her hauls at Dollar Tree and other stores, and will lead her to shop there less often. (She spoke under the condition that her name be withheld from the story to protect her identity.)
"We all, in the Dollar Tree community, hoped it wouldn't happen," she said, adding that $1 was a price "you could count on."
"There was no doing math in your head or anything like that," she said. "You know you could go to the Dollar Tree with $10 and walk out with 10 items."
Although Dollar Tree has put up new signs at stores that say it will offer new items and "more thrills" at $1.25, she has yet to see the change.
"It's like they're promising you something more for 25 cents. But it's not. It's all the same quality and types of products."