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Here's How Dollar Tree Is Staying Competitive in the Retail Game

By Maurie Backman – Dec 1, 2021 at 10:02AM

Key Points

  • Discount stores have been booming since the pandemic began.
  • Dollar Tree is expanding its footprint and renovating stores for a better shopping experience.
  • Now it's introducing a new offering that could grow its customer base.

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The discount giant is going above and beyond to offer customers affordable products in a convenient fashion.

The coronavirus pandemic dealt a hard blow to retailers in 2020, as many nonessential stores were forced to shutter temporarily early on in the outbreak. But even once stores were able to reopen, many found that consumers just weren't spending, given the state of the economy last year. And even though this year's economy is stronger, some consumers are still spending more conservatively -- perhaps in an effort to recover from personal losses incurred in 2020.

But one breed of store has managed to emerge victorious in the wake of the pandemic: discount stores. While other brands have contemplated closures in 2021, dollar stores have expanded their footprint.

Dollar Tree (DLTR 0.20%) is one of them. Earlier in the year, it set a goal of opening 600 stores in 2021 and renovating 1,250 existing locations in an effort to stay competitive. But that's not the only thing Dollar Tree is doing to retain its edge.

Masked person in store greeting card aisle.

Image source: Getty Images.

Introducing same-day delivery

During the pandemic, consumers have increasingly relied on delivery services largely due to safety concerns, but also due to the convenience factor. Dollar stores don't traditionally offer delivery. But Dollar Tree is changing that.

The discount chain has teamed up with Instacart to offer same-day deliveries for customers. What started as a pilot program involving 275 stores has since increased to 7,000 locations.

It's a strategic move, to say the last. As discount stores continue to expand, those offering the most value to customers are more apt to command a larger share of the market. Dollar Tree is capitalizing on the e-commerce trend by recognizing the need to offer consumers not just delivery but same-day service. And in doing so, Dollar Tree might manage to convert some skeptics -- consumers who traditionally don't shop at discount stores under the assumption that their selection is too limited.

Of course, to really remain competitive, Dollar Tree will need to find a way to keep its prices as close to the $1 mark as possible. Recently, the retailer announced plans to shift its price point to $1.25 for most items -- a natural response to recent supply chain woes and inflation, but a blow to consumers nonetheless.

But offering delivery could help offset these higher prices. This especially holds true if Dollar Tree manages to capture a new audience with its delivery offering -- consumers who don't need to shop at dollar stores due to financial constraints but who start opting to shop there for the convenience factor alone.

What real estate investors should know

At a time when so many stores have shuttered on a permanent basis, dollar stores are helping to keep shopping centers afloat. And real estate investors with shopping centers in their portfolios need discount chains to continue to thrive in the coming years, as has been the case since the start of the pandemic.

By offering same-day delivery, Dollar Tree can help to secure its spot as a shopping center mainstay, all while growing its customer base, so that it has the potential to expand even more at a time when store closures have become more commonplace.

Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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