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Business Operations Business Models

How Does Dollar Tree Make Money (Business and Revenue Model)

The Dollar Tree business model

How Does Dollar Tree Make Money?
Here’s what you should know:
  • What is Dollar Tree, and how does Dollar Tree work?
  • How does Dollar Tree make money?
  • Retail Sales
  • Dollar Tree’s Subsidiaries, Acquisitions, and Exits
  • Dollar Tree’s profit and revenue
  • What is the Dollar Tree business and revenue model?
  • Dollar Tree’s funding and market cap

How does Dollar Tree make money if it’s so cheap? Here is a full, in-depth, breakdown of their main revenue stream, as well as the Dollar Tree business model, their year-over-year revenue, and how Dollar Tree works.

What is Dollar Tree, and how does Dollar Tree work?

Dollar Tree is a national chain of discount variety stores with price points of $1.25 or less.

Founded in 1991 by J. Douglas Perry and Macon F. Brock, Jr., Dollar Tree began trading on the NASDAQ on March 6, 1995, under the ticker symbol “DLTR”.

Since that time, Dollar Tree has acquired and combined Family Dollar and its roughly 13,000 stores, leading Dollar Tree to operate more than 16,000 retail discount stores across 48 states and five (5) Canadian provinces – making them the largest operator of chain discount variety stores in the US by the number of stores.

How Dollar Tree works is: Some of the reasons how Dollar Tree is able to keep price points so low, according to Dollar Tree, are (1) their substantial purchasing power, (2) sourcing decisions, (3) ability to negotiate economic the impacts such as tariffs, (4) purchasing products on an order by order basis, (5) having no long term purchase contracts with vendors, and (6) no more than 10% of total merchandise purchased is from a single vendor.

Some of Dollar Tree’s competitors include Five Below, Walmart, Dollar General, and other retail discount stores.

How does Dollar Tree make money?

According to page 7 of Dollar Tree’s 2021 Form 10-K, Dollar Tree has more than 16,000 discount variety retail stores open across 48 states and five (5) Canadian provinces.

So how does Dollar Tree make money off of all these stores if the prices are so low?

Below is a breakdown of how much money Dollar Tree makes and its revenue model. Including all revenue streams and how much they charge for their services.

Here is how Dollar Tree makes money (in 2022):

Dollar Tree has a revenue model that makes money in just one (1) way – retail sales.

#1. Retail Sales

Dollar Tree makes all of its money by selling merchandise in store and online, which totaled $26.32 billion in revenue in 2021.

As noted above, Dollar Tree has over 16,000 discount variety retail stores open across 48 states and five (5) Canadian provinces. Of which, each store carries between 7,000 to 7,600 of in store merchandise. Although – the total number of units sold and average sales price (ASP) in 2021 are unknown.

Of those 16,000 plus stores, roughly half of them are Family Dollar stores – which translates to almost half of Dollar Tree’s total revenue.

Dollar Tree and Family Dollar Prices:

  • Dollar Tree: $1.25 or less (on January 29, 2022, Dollar Tree raised its prices from $1.00 to $1.25)
  • Family Dollar: prices range between $1 to $10
Dollar Tree and Family Dollar Prices | Dollar Tree Business Model | How Does Dollar Tree Make Money? | How Does Dollar Tree Work?
Source: Dollar Tree

Note: Family Dollar, subsidiary of Dollar Tree, generated $12.38 billion or 47% of Dollar Tree’s total revenue in 2021.

Dollar Tree’s Subsidiaries, Acquisitions, and Exits

To date, Dollar Tree, Inc. has made a total of 4 acquisitions and 1 investment.

One of which was Family Dollar, a top competitor of Dollar Tree, that was acquired for a reported $8.5 billion back in 2015.

Dollar Tree Acquisitions | Dollar Tree Business Model | How Does Dollar Tree Make Money? | How Does Dollar Tree Work?
Source: Crunchbase | Dollar Tree

Dollar Tree’s profit and revenue

In 2021, Dollar Tree reported $26.32 billion in revenue.

Note: Because Dollar Tree, Inc. is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of Dollar Tree’s publicly released financial reports, including annual reports, through Dollar Tree’s investor section on their website.

What is the Dollar Tree business and revenue model?

Dollar Tree makes money through a few revenue models that they combine within their company, they are:

  • Transaction based business model
  • B2B2C (partnerships) business model
  • Mergers & acquisitions (M&A) business model

Dollar Tree’s funding and market cap

According to Dollar Tree’s Crunchbase profile, Dollar Tree has raised $370 million over 1 round and has a market cap of $37.25 billion as of April 2022.