How Dollar Tree’s Higher-Priced Items Could Actually Save You Money

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Dollar Tree is rolling out items at $3, $4, and $5 in an attempt to widen its appeal. Find out how this price experiment could be good for your wallet. 

The days when dollar store items actually cost a dollar are long gone. It makes sense, given that many of the chains we see today were born more than 50 years ago when you could get a lot more bang for your buck. Indeed, Dollar Tree was one of the last big names in dollar stores to push its prices up when it did away with its $1 price point in 2021.

The trouble is that those non-dollar prices have left these brands with somewhat of an identity crisis. Which is one reason why Dollar Tree decided to roll back the prices of around 5% of its products to $1. However, it’s also planning to introduce new price points of $3, $4, and $5. The thinking is that it’s done the difficult part with what it labels “breaking the dollar.” Now it’s free to experiment.

Here are some of the ways the higher price tags could be good for your bank account balance.

1. You’ll be able to benefit from bulk savings

Dollar stores are on the other end of the spectrum from warehouse chains like Costco. Where one sells individual products at low, fixed prices, the other offers value by selling in bulk. If dollar stores relax their laser-sharp focus on individual price tags and instead center on value, consumers may get better deals.

For example, Dollar Tree’s new pricing strategy lets it sell a six-pack of Harmony paper towels for $5 online. Walmart has something similar for $7.12. Dollar Tree online also offers a case of six bottles of Xtra Tropical Passion Laundry Detergent (67.5 oz) at $3 each, $18 in total. Given that its smaller bottles of laundry detergent come in at $1.25 for an 8 ounce or 10 ounce bottle, this is a significant savings. The $3 bottle costs $0.04 per ounce — much better value than the $1.25 bottles, which cost $0.15 or $0.13 per ounce.

2. You’ll be able to buy a wider range of items

One of the challenges with dollar stores is that they tend to stock a much smaller range of products than big box retailers do. You might only find one brand of, say, orange juice on the shelves. And a number of products won’t be there at all. The new price strategy will let Dollar Tree sell items that you’d normally have to buy elsewhere.

According to its investor presentation, the new price points would allow Dollar Tree to sell family-sized frozen products rather than single servings. For example, instead of a single frozen cheeseburger, you might buy a family-sized pizza or a packet of 18 fish sticks. Dollar Tree is still experimenting with different prices, but higher price tags could pave the way to more variety as well as bulk savings.

3. You’ll be able to stock up your freezer

Frozen produce can be a great way to save money and still eat well. I’m not talking about filling your freezer with pizzas and chicken nuggets. But frozen fruit and vegetables often cost less than fresh produce. Plus, they don’t go bad as quickly as fresh produce, and are still packed with nutrients.

Part of the plan with the higher prices is to install more cooler units and sell more frozen products. Dollar Tree’s Chairman and Chief Executive Officer Rick Dreiling told investors on a recent earnings call that the company has “aggressively expanded our product assortment at Dollar Tree stores with $3, $4, and $5 frozen and refrigerated products.” In the future, 80% of the frozen aisle at Dollar Tree might be products in the higher price categories.

How to maximize dollar store savings

Dollar stores are certainly one way to save money, particularly if you know what to look for. Here are some ways to make the most out of your dollar store shopping.

Don’t assume dollar stores will always be cheaper: One of the big downsides of dollar store shopping is that the low prices don’t always represent the best value. Let’s say you see a bar of chocolate in a dollar store for $1.50, and the same brand in a big box store for $2. You buy the cheaper one thinking you’re saving $0.50. But if the dollar store bar is significantly smaller, it’s a fake bargain.Check the packaging carefully: Avoid dented cans (which can harbor nasty bacteria), and check frozen produce for holes in the packages that can cause freezer burn. Also, check the sell-by dates. Dollar stores often limit staff numbers to save money, which means staff have less time to remove out-of-date items from the shelves.Use a rewards credit card: Use a rewards credit card to earn points or cash back on everyday spending. It’s also worth looking into cash back apps and coupons. You might have to check the fine print, as there may be limits on the number of coupons you can use and the package sizes may not match.

There are lots of ways to reduce your grocery costs, including dollar store shopping. Just remember that lower price tags don’t always mean better value. It’s early days for Dollar Tree’s new prices, but so far the $5 products may help your budget just as much as the $1 ones.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Walmart. The Motley Fool has a disclosure policy.

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