(Washington Insider Magazine) –Inflation is on the rise in the United States, largely due to the amount of assistance given by federal and state governments in the wake of the COVID-19 pandemic and vaccine mandates. Because of this, prices are on the rise from groceries to rent – and citizens are working second and third jobs to simply make ends meet.
The Dollar Tree has not been immune to the effects of inflation, which is being felt by consumers who go there for the affordable prices and the wide variety of products that they sell.
This has been a long time in coming, as other favorite United States shopping titans (such as Five Below, the Dollar Spot, Family Dollar, and others) have been stealthily raising the prices over the past few years.
While many speculate the reason, it has been confirmed to be partially due to the rising cost of living and the rising cost of employment, as Los Angeles employment minimum wage requirements recently topped fifteen dollars per hour.
While this is a measure to account for economic flexibility and inflation, many stores are also using the opportunity to raise and lower prices as a live-time customer experiment to determine the ideal price points for every item – what will sell the most at the most profitable price point. It’s a centuries-old method that has shown great results for many big-box retailers, so it isn’t entirely surprising that Dollar Tree would continue to do the same with larger-scale prices.
The chain began more aggressive testing methods as of September 2021, presumably in preparation for the upcoming holiday season. The response was quite positive among most of their shoppers across the nation, and prices ranging from $1.10-$1.75 didn’t affect sales negatively enough to discontinue the experiments. Soon into October and November of 2021, many locations decided to make those prices final into the store’s price scheme, and shoppers have continued to throng.
CEO Michael Witynski states that while this type of price movement isn’t considered a defensive move, this will allow him to better serve his customers in the future with more flexible pricing in the wake of a new economical structure as prices continue to rise elsewhere.
Defensive pricing is a sound strategy, and Dollar Tree’s confidence in its own client base is inspiring other companies to do the same. More companies may employ this strategy to reach an ideal equilibrium between the cost of goods sold, as well as the cost of living, coupled with the profit margins that corporations need to facilitate normal operations.
With this pricing volatility, many businesses are taking the time to raise prices in order to raise their wages thanks to outsider pressure from other businesses in a competing space. While price increases can put a strain on the consumers, they may also provide additional support to employees in need in the wake of the COVID-19 pandemic.