Dollar Tree Now a Misnomer, as Prices Are Set to Rise

Chris Gaetano
Published Date:
Nov 23, 2021

The Dollar Tree's name is now a little less accurate, as the discount store chain will soon increase most of its prices to above a dollar, CNN reported. The company, one of the last true dollar stores in the nation, announced that, starting next year, most products will now cost $1.25. The Dollar Store said that its decision is not connected to short term or transitory market conditions, but then also said that the reason for the price increase was its growing difficulty securing popular products for only a buck, which indicates at least some eye toward the wider economy. The store chain also mentioned historically high price increases in merchandise. Raising prices slightly will allow it to reintroduce items that it has had to discontinue because of cost.

Beyond inflation, though, CNN noted that investors had also been pressuring the company to raise prices for quite some time, and it recently agreed to test out new prices in certain stores; these trials likely led to the across the board price increase just announced. 

The Dollar Tree, for over 30 years, sold all its products for just a dollar. This announcement, then, represents the end of an era, as it joins other stores in the broader category of "discount stores." Though perhaps the savings had always been a mirage. While, on their face, the products are much cheaper than they would be at a more traditional retailer, analyses have found that, over the long term, they are actually more expensive. While the price of each individual unit is smaller, so is the amount of product that a customer receives, compared to other stores. This means that the products run out faster, and so must be replaced more frequently. These smaller purchases add up over time, to the point where getting the same amount of product winds up being pricier. For instance, 100 square feet of toilet paper costs $2.05 at a dollar store, even though individual rolls might cost much less. In contrast, 100 square feet of toilet paper at Target costs $1.71. 

This is part and parcel to what economists have dubbed the "poverty tax." Basically, people with less money buy cheaper goods that break or wear out faster than more expensive, quality products. For instance, consider someone who buys a new car for $30,000. It is highly reliable and lasts a good 12 years.

Now think of someone else who buys a used car for $5,000. It lasts two years before finally breathing its last. The person buys another one for $9,000, and this one also lasts two years. The same buyer get a third one for $12,000 This one lasts three years. After that, the person buys another car, costing $7,000, and it breaks down after just one year. This person finally buy another car for $10,000, and this one (possibly due to luck, a low odometer or both) lasts four years. 

In the same 12-year period, the first person spent $30,000 while the second person spent $43,000. The second person very likely would have liked to afford the $30,000 car, and is probably well aware that he or she is spending more in the long run, but getting that new vehicle is simply out of that person's reach. This example explains the paradoxical adage that being poor is expensive

Click here to see more of the latest news from the NYSSCPA.