Remember when Dollar Tree actually lived up to its name?

For roughly 35 years, you could walk into a Dollar Tree and actually spend $1 on whatever it was you were looking for — a cheap kitchen item you needed to replace quickly, a box of colored pencils for your kid’s school project, or even an impulse candy purchase.

But in 2021, Dollar Tree shocked consumers by announcing that it would shift its standard price point from $1 to $1.25.

At first, Dollar Tree was blasted for what appeared to be a knee-jerk response to inflation. But the company insisted that raising its core price point would allow it to offer customers a wider assortment of products and higher-quality items.

At this point, many of us are used to spending more than $1 at Dollar Tree. But the last time I took my kids there, we were all surprised by the sheer number of products that cost way more than $1.25.

As my daughter put it, “I think they’re trying to scam us.”

She isn’t totally wrong.

Not only are the days of $1 items at Dollar Tree long gone, but in the coming years, the once-affordable discount retailer is likely to shift toward increasingly expensive inventory. 

That’s not a good thing for budget-conscious consumers. And it may not be a good thing for Dollar Tree, either. 

Snacks are shown at Dollar Tree. Lead.

Image source: Shutterstock

Dollar Tree is having an identity crisis

Part of Dollar Tree’s problem right now is that it’s trying to cater to two distinct types of customers — the cash-strapped shopper and the higher earner who’s looking for a bargain. Whether that strategy succeeds remains to be seen.

Dollar Tree has quietly raised prices on various items in recent years. And customers are finally starting to notice.

Related: Costco sees shift in member behavior

A timeline of Dollar Tree’s pricing strategy

  • 2021: Dollar Tree raises its base price to $1.25.
    Source: Fortune
  • 2023: Dollar Tree introduces many $5 items into its lineup.
    Source: Retail Dive
  • 2024: Dollar Tree expands inventory to include $7 items.
    Source: Fortune
  • 2025: Dollar Tree quietly raises prices on key items from $1.25 to $1.50.
    Source: Parade

During Dollar Tree’s most recent earnings call, CEO Michael Creedon said, “Expanding our assortment to include items at a variety of price points is fast becoming the standard Dollar Tree model.”

But while Creedon claimed that introducing higher-priced items gives the company more flexibility, some customers may not see it that way.

What’s next for Dollar Tree?

In 2019, a Jefferies survey found that 76% of Dollar Tree customers were willing to pay more than $1 on select items in exchange for higher-quality products and a larger selection. 

But that survey was conducted before inflation started to soar and batter consumers for years on end. 

Related: Dollar Tree sees shift in consumer behavior

It’s clear that Dollar Tree has gotten comfortable putting higher price tags on its products, and that some customers are, indeed, willing to pay. 

The concern, though, is that Dollar Tree will continue to push prices further and further from the $1 mark, thereby hurting those consumers who rely on discount stores the most. And as Dollar Tree nudges more of its products to the $1.50 price point, it could end up pushing lower-income shoppers toward competitors such as Aldi.

These days, over 10% of people earning $100,000 or more shop at Dollar Tree, according to CBS News, citing findings from GlobalData Retail. But if Dollar Tree continues to chase those customers at the expense of its core consumers, it could end up shooting itself in the foot.

Also, the higher Dollar Tree drifts above the $1 price point, the more it erodes one of its key value propositions – simplicity. 

The beauty of walking into Dollar Tree used to be knowing that no matter what item you grabbed off the shelf, it would only cost $1. That mindset held true, even when Dollar Tree raised its standard price point to $1.25.

But if Dollar Tree keeps stuffing its shelves with higher-priced items, customers will eventually become confused and annoyed. And that means they’ll likely take their money elsewhere.

Related: Walmart makes tough decision that may anger customers