‘The tariffs are more difficult for Dollar Tree than rivals because the company has a one-dimensional business model that is not easily flexed or changed…’
(Lionel Parrott, Liberty Headlines) “Everything’s a dollar” might no longer hold true at Dollar Tree … and that’s because the retail chain is feeling the pain from the trade dispute between the United States and China.
Concerns over tariffs placed recently on China have hit both Dollar Tree and its rival, Dollar General, particularly hard, reported WCNC News.
About 40 percent of the store’s products come from China.
While sales for both stores during the first quarter of 2019 were reported to be “solid,” Business Insider said Dollar Tree will add products that are priced at over $1 dollar if the U.S. imposes a fourth round of tariffs on Chinese imports.
“If tariffs on [those products] are implemented, we expect that it will be impactful to both our business, and especially to consumers in general,” said Gary Philbin, who is president and CEO of Dollar Tree.
A financial data analyst warns that retail outlets like Dollar Tree might be particularly vulnerable to negative effects from a trade war.
“Both Dollar Tree and Family Dollar have a much heavier exposure to very low-income shoppers than Dollar General and these individuals are much more likely to be affected by inflation, leading to possible reductions in the amount they buy,” wrote Neil Saunders, the managing director of GlobalData Retail. “This has the potential to clip sales volumes and growth.”
Business Insider said that Dollar Tree is the only major dollar-store chain in the U.S. to have adhered to an “everything’s a dollar” policy, with a unique business volume premised on the assumption that low-income customers will be willing to buy more products if they’re all at exceedingly low prices.
But that strategy makes it fragile.
Said Saunders: “The tariffs are more difficult for Dollar Tree than rivals because the company has a one-dimensional business model that is not easily flexed or changed.”