Dollar Tree's small-town store concept is big win for customers

Dollar Tree Inc. is going big on its small store concepts.

The discount retailer is expanding stores targeted for small towns and rural communities, which have already driven on average 20% in sales since launching in 2019.

"These are markets where the company would traditionally not open a Dollar Tree store alone," the company said. However, in combining Family Dollar’s "great value and assortment" with Dollar Tree’s fixed price, the brand is able to "serve more customers in all types of markets," the company added.

The smaller-scale stores combine the company's brands and are targeted for communities with populations between 3,000 to 4,000, the company specifieded in its quarterly earnings on Wednesday.

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It's a concept that has proven to be successful among its customer base.

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Not only are the locations delivering higher gross margins, but they are better at leveraging store expenses, the company said.

Dollar Tree opened its first combination store in 2019 followed by two more test locations in 2020. Since then, Dollar Tree has analyzed the store performance and customer feedback to better refine the stores.

The company is currently operating 50 combination locations and plans to evolve the concept.

“We are extremely pleased with our customers’ response to the new Combination Store concept," Dollar Tree CEO Michael Witynski said in a statement. "As I have said in the past, we will continue to refine our strategic store formats so that we are able to better serve customers, while improving store productivity, margins and returns."

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Alongside its flagship locations, the new format will also be "part of the Family Dollar new store and renovation strategy moving forward."