The Dollar Tree Price Raise
Measuring brand impact of a business pivot
Henry Chapman, Research and Insights Analyst
Dollar Tree’s contentious business pivot
Dollar Tree has successfully executed a contentious business pivot without negative impact to its brand value.
This brief surveys reasons behind the pivot as well as customer responses that reveal that ultimately, the pivot was a successful venture that did not negatively impact Dollar Tree’s brand.
Dollar Tree reacts to changing economy
Dollar Tree, founded in 1953, started selling items for $1 in 1986. At the time, it was mostly popular in the eastern parts of USA, but it grew by acquiring a series of smaller dollar store chains across the US. Until recently, it was one of the last stores chains operating under the “everything’s a dollar” motto.
Responding to long-developing supply chain constraints, Dollar Tree took a massive business pivot in November 2021: the chain raised prices of most goods to $1.25 per item.
Dollar Tree’s need to pivot
Economic conditions make pre-existing prices untenable
While the company publicly denied that the price increases were due to inflation, economists point out that economic conditions were the impetus for the price raises – more specifically, supply chain constrictions. Dollar Tree faced down unprecedented supply shocks in 2020. Their business, primarily grocery and dry goods, was particularly affected by the logistic bottlenecks associated with international shipping backlogs. The price-hikes were necessary to keep the business viable.
Figure 1: News Article Explaining That Dollar Tree’s Pronouncement That Price Move Was Not Due To Inflation. Many economists doubted their reasoning.
Results of the pivot
Dollar Tree’s price increases represented a tremendous risk for a company that staked its entire identity on keeping prices steady at $1.00. However, Dollar Tree reported a 30.1% earnings per share growth in Q2 2022. Additionally social listening data shows overall Dollar Tree sentiment is just short of it’s all time high positive sentiment score.
Figure 2:Dollar Tree Sentiment over the last three years. Note the drop in sentiment when price increase was announced.
Why Dollar Tree’s pivot worked
Low competition for a niche customer-base
Dollar Tree has found a niche in places where consumers cannot rely on traditional grocery stores e.g, very rural communities or urban food deserts. Therefore, Dollar Tree didn’t lose customers with the pivot since their customer-base has limited purchasing options.
Figure 3: Maps showing Dollar Tree locations (left) and Dollar Tree post volume locations on Infegy Atlas (right)
1. Net positive online sentiment
Infegy Atlas shows the vast majority social conversation around Dollar Tree comes from middle-aged women interested in crafting. People post frequently about Dollar Tree’s craft supplies, DIY offerings, and affordable holiday decorations.
Around 75% of the conversation around Dollar Tree was dominated by female voices. Analyzing the conversation before and after the pivot, these female voices speak about the brand positively 81% of the time.
Figure 4: Positive female post volume along with female crafting-related topics
2. Net positive online sentiment (continued)
In November 2021, the month Dollar Tree announced the price increase, the percentage of men talking about Dollar Tree doubled, while the percentage of women talking about the chain was cut in half. Those men, on average, were 20% less likely to speak about the brand positively during their conversation. This would be alarming except, looking at conversations over the 3 years, data reveals this share of male audience to be atypical for the brand.
Also crucial, Dollar Tree’s female share of conversation returned to the mean shortly after the price increase, suggesting that negative conversation was temporary, and didn’t pose lasting damage to the brand.
Figure 5: Male vs. female post volume. Note the increase in male post volume when price increase was announced
3. Demographics of Dollar Tree’s critics
Examining Channel Distribution provides further evidence of non-traditional post volume: Pinterest typically houses 84% of the Dollar Tree conversation. After the price increase, conversation spiked on Twitter, representing critics hopping on Twitter to discuss their displeasure. This Twitter share of was not only atypical for social conversation around Dollar Tree, the conversation was predominantly male while the typical conversation on Pinterest represented a predominantly female voice. Furthermore, shortly after the after the price hikes were implemented, Pinterest’s share of Dollar Tree conversation returned to normal.
Figure 6: Post volume distribution by social media channel. Note, when the price increase was announced, Twitter conversation increased while Pinterist post volume decreased
Conclusion
Examining a successful business pivot
Dollar Tree took a risk by altering a fundamental part of their business. They succeeded, as shown by the growing stock price and earnings per share. Dollar Tree’s pivot worked because their rural and urban customer base didn’t have a lot of alternative shopping options. Additionally, unprompted and unfiltered online conversation reveals a net positive sentiment from Dollar Tree’s typical conversants (those who discussed Dollar Tree prior to the pivot, as well as after). While Infegy data showed possible threats to user sentiment and brand perception, those setbacks proved to be temporary, and online conversation quickly returned to the mean.