Dollar Tree Breaks the Dollar Barrier. The End of an Era?
On August 27, 2021, I wrote in Disruption Report #30:
Dollar Tree is the most vulnerable of any retailer to cost increases. When you sell everything in your store for $1, you need to find products that you can actually sell for $1. With the increase in freight rates and inflation in general, it will be hard, if not impossible, for the retailer to find sufficient products that can sustain such a low price point.Disruption report #30, Richard Gottlieb, August 27, 2021
On September 29, 2021, Dollar Tree CEO, Michael Witynski, stated:
“Our brand promise is that customers get great value for what they spend at Dollar Tree. We will continue to be fiercely protective of that promise, regardless of the price point, whether it is $1.00, $1.25, $1.50.”Dollar Tree CEO Michael Witynski,
It looks like we may be facing the end of an era for the dollar store concept. Where it will end (Two Dollar Stores?) is anyone’s guess. Inflation is very much with us. This New York Times headline from October 1, 2021, says it all: “Inflation Warning Signs Flash Red, Posing Challenge for Washington.“
Inflation Rises At Fastest Rate in 30 Years
The article I cited in the above paragraph, “Inflation Warning Signs Flash Red, Posing Challenge for Washington,” worries those of us who have been around long enough to recall previous inflationary periods (think double-digit mortgages).
The article’s author, Jeanna Smialek, writes:
The Federal Reserve’s preferred gauge of inflation climbed in August at the quickest pace in 30 years, data released on Friday showed, keeping policymakers on edge as evidence mounts that rapidly rising prices are poised to last longer than practically any of them had expected earlier this year.
Concerns about Inflation are more than about the cost of a toy going up. It’s about the cost of what you have to have (food, drugs, housing) s increasing so that families have less money to spend on what is nice to have (toys for one).
Look for inflation to continue into next year.
The Press Keeps Talking About Toy Scarcity; The Impact on Sales
The headlines keep coming:
“Santa’s sleigh is looking emptier. Fewer toys, higher prices loom for holiday season,” NPR, October 1, 2021
“Get ready for fewer — and pricier — toys on shelves this holiday season,” Business Insider, September 28, 2021
“Toy shortages, supply chain among reasons to start holiday shopping now, experts say,” ABC News, September 17, 2021
Consumers, bombarded with these headlines, will indeed shop early. The result will be an historically outsized third-quarter, a much smaller fourth quarter, and an equally outsized first quarter 2022. Out of stocks in the fourth quarter will mean an increase in gift card giving by adults who don’t want to disappoint children who will not receive the toys for which they have been begging. Rather than disappointment, we are going to see calls for children to be patient.
Unless these children are different from children of prior generations, patience will be scarce on the ground. Alas, the children of the 2020s will be asked, once again, to make sacrifices. It’s not fair, but it’s, unfortunately life in the 21st century’s third decade.