In 1986, Douglas Perry, Macon Brock, and Ray Compton founded Dollar Tree Stores as an offshoot of retail chain K & K Toys. K & K was divested in 1991 in order to place full emphasis on developing the dollar store concept. At that time, strategic challenges included shifting the company away from closeouts, growing the firm, and locating stores in more economical strip centers rather than shopping malls.

Dollar Tree went public in 1995 and acquired Chicago-based retail chain Dollar Bills the following year. Dollar Tree acquired California retail chain 98 Cent Clearance Centers in 1998;

New York state retail chain Only $One in 1999; and Pennsylvania-based, single price retail chain Dollar Express in 2000. The acquisition effort continued with Greenbacks, adding its 96 stores in 2003, and Deal$-Nothing Over a Dollar, adding another 138 stores in 2006. Dollar Tree continues to expand internally as well, opening fully automated distribution centers in an effort to improve its operating efficiency and support its ongoing expansion.

Merchandise in a typical Dollar Tree includes candy and food, housewares, seasonal goods, health and beauty care, toys, stationery, and gift items. The company operates about 4,100 discount stores in 48 states with the following names: Dollar Tree, Dollar Bills, Dollar Giant, and Deal$.

Stores are located primarily in high-traffic strip centers anchored by mass merchandisers and supermarkets.

New stores also tend to be larger than older ones, approaching 15,000 square feet.

Most of Dollar Tree’s products are priced at one dollar; about 40% of its product line is imported from China. Sales of consumables—including food—have increased to about half of total revenues. To address this shift, Dollar Tree has added freezers and coolers in about half of its stores.

Dollar Tree customers tend to be price-conscious and perceive the prices at other discount retailers such as Target and Wal-Mart to be excessive. Dollar Tree offers low prices and exceptional convenience due to small store layouts and the simplicity of checkout with most products costing one dollar.

Case Challenges
1. Dollar Tree’s initial growth was almost exclusively through acquisition. Is it likely to be an attractive option in the near future?
2. Why is Dollar Tree able to offer its products at prices below those of discount chains such as Wal-Mart and Target, firms with greater economies of scale?
3. With annual inflation, it will become more and more difficult for Dollar Tree to continue offering almost all of its products for $1? How might such a company ease into offering its products at higher prices? Would doing so undermine the company’s image?