Businessmodel of Dollar Tree

Customer Segments

Dollar Tree provides a customer base of general consumers with a range of products at discounted prices.

The Company’s Dollar Tree and Family Dollar-branded stores are targeted generally at lower income consumers, typically located so as to serve local communities. In 2014 it was reported that around 40% of Family Dollar’s customers had a household income of less than $25,000, which is slightly higher than the poverty level for a family of four. Dollar Tree is also popular with shoppers that are seeking to purchase products in bulk, often consumables such as candy, household products, and seasonal products.

Dollar Tree’s largest market is its native US. The Company, however, also serves customers in Canada, operating a Canada-focused unit named Dollar Tree Canada.

Value Propositions

Dollar Tree provides value to its customers in the following ways:

• Its low prices and sourcing structure, with the Company’s Dollar Tree and Family Dollar-branded stores providing merchandise at low prices, with products procured from a variety of sources and suppliers;
• Its domestic and regional sales reach, with the Company operating a broad network of more than 16,000 retail outlets across North America, situated in convenient locations from local communities;
• Its broad catalogue of products, with the Company offering a broad range of products across multiple categories, including consumables, household products, apparel and accessories, and seasonal and electronics; and
• Its accessibility, with the Company operating an online sales channel for its Dollar Tree stores, as well as a smart coupon service and mobile apps, which enables customer to utilise the Company’s services from anywhere. ### Channels

Dollar Tree operates websites for its two store brands at www.dollartree.com and www.familydollar.com, through which the Company provides information on its various products, its coupon services, and locations. The Company also operates an online sales channel through its Dollar Tree website, through which customers are able to make purchases and arrange deliveries, as well as a telephone sales channel. The Company also operates a Coupon for Family Dollar store app, which allows customers to access additional discounts and deals.

The majority of Dollar Tree’s sales are made through its network of physical retail outlets, including 5,954 Dollar Tree stores and 7,897 Family Dollar stores, where the Company’s sales and customer service staff deal with customers directly. The Company also operates 12 Dollar Tree distribution centres, ten in the US and 2 in Canada, and 11 Family Dollar distribution centres in the US, as well as store support centres in in Chesapeake, Virginia, and Matthews, North Carolina.

Dollar Tree also operates a network of affiliates, which help to extend the Company’s own marketing and sales reach.

Customer Relationships

Dollar Tree provides various services to its customer on a self-service basis, in particular through its online Dollar Tree store, through customers can purchase merchandise, organise deliveries, and track orders without interacting with members of the Company’s sales teams. The Company also offer coupon services that customers can access through their phones.

Throughout the Company’s network of more than 13,000 retail outlets, Dollar Tree employs a workforce of sales and customer service staff who are able to interact directly with customers, assist with queries and provide advice. The Company’s stores are designed to create an inviting atmosphere, including attractive merchandise displays, with a view to encouraging recurring business.

Dollar Tree provides certain support resources on its websites, including FAQs and recall information. Customers can also contact the Company customer support staff directly over the phone. Additionally, Dollar Tree operates a number of social media accounts under its Dollar Tree and Family Dollar brands, including with Facebook, Twitter, LinkedIn, and Pinterest.

Key Activities

Dollar Tree is an operator of discount variety stores, operating more than 13,000 discount variety retail stores across the US and Canada.

The Company’s operations are divided into two business segments: Dollar Tree which operates discount variety stores offering merchandise at a fixed price of $1.00 under the Family Tree brand; and Family Dollar, which operates a chain of general merchandise retail discount stores under the Family Dollar brand, which offer a selection of products in neighborhood stores.

The Company also operates stores under the Dollar Tree Canada, Deals, and Dollar Tree Deals brands. Dollar Tree operates its own distribution infrastructure, including distribution centres in the US and Canada and store support centres the US.

Key Partners

Dollar Tree collaborates with a network of partners throughout the process of purchasing, selling, and distributing its products. The Company’s partners include:

• Marketing and Affiliate Partners, comprising a range of companies, online retailers, and websites, which help to extend the Company’s marketing reach in return for commissions on sales;
• Supplier and Vendor Partners, comprising suppliers of merchandise, supplies and services, and logistics, which support the Company’s retail and distribution operations;
• Real Estate Partners, comprising real estate developers and property companies, with which the Company collaborates in identifying appropriate locations for its discount stores; and
• Transportation and Distribution Partners, comprising distribution and logistics companies that support the Company’ own distribution activities. Dollar Tree has a number of partnerships, including with PayNearMe, which provides payment solutions to the Company, and with Infosys, which provides technology services to the Company.

Key Resources

Dollar Tree’s key resources are its catalogue of products and merchandise, its physical network of retail outlets, its online and mobile platforms, its IT infrastructure, its distribution and logistics infrastructure, its partnerships – notably its suppliers, and its personnel.

Dollar Tree owns and or leases range of properties across the US and Canada that are material to its operations. This includes a chain of more than 13,000 retail outlets, including 5,945 under the Dollar Tree brand and 7,897 under the Family Dollar brand, as well as a combined network of 23 distribution centres and two store support centres under both brands.

Cost Structure

Dollar Tree incurs costs in relation to the acquisition of products and merchandise – as well as the procurement of additional services, the operation of its retail outlets, the development and maintenance of its online and mobile channels, the implementation of advertising and marketing campaigns, the maintenance of its IT infrastructure, the operation of its distribution and logistics infrastructure, the management of its partnerships, and the retention of its personnel.

In 2015 Dollar Tree accrued selling, general, and administrative costs – including advertising expenses and the payment of salaries and benefits to its workforce of 55,300 full-time and 112,500 part-time employees – amounting to $3.61 billion. The Company’s cost of sales was recorded at $10.84 billion, including occupancy costs, the cost of merchandise, and the cost of warehousing and distribution operations.

Revenue Streams

Dollar Tree generates revenue through the sale of various products and merchandise through its chain of Dollar Tree and Family Dollar-branded stores. The Company’s sales are segmented by product category:

• Consumable;
• Home products;
• Apparel and accessories; and
• Seasonal and electronics. In 2015 the Company generated total net sales for the year of $15.50 billion, up considerably on the $8.60 billion recorded by the Company in 2014. This was significant increase was attributed to the consolidation of Family Dollar’s operations into those of Dollar Tree. The majority of the Company’s sales are from its consumables product category, accounting for 68.4% of the Dollar Tree’s total sales for the year. Seasonal and electronics sales accounted for 15%, home products for 9.8%, and apparel and accessories for 6.8%.