January 4, 2016 11:20 am
Updated: January 4, 2016 2:04 pm

Dollarama’s push to hike prices has hit a wall at $4: experts

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The country’s dominant bargain-store chain made headlines last month when it confirmed plans to introduce prices that will be much closer to $5 (with taxes) rather than a buck.

Dollarama has made a pretty good run in recent years by introducing new products at higher prices on everything from food to seasonal products to houseware that shoppers have eagerly embraced.

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So much so that more than three quarters of the items sold in store now are priced at more than $1 (see chart below). That’s a big difference from just a few years ago, when half the items sold were $1.00 or less.

The problem now though is that Dollarama is struggling to find items that fall within the new high end of its price range that are good enough to put on the shelf, according to experts.

Dollarama is experiencing “difficulty in sourcing products at the new $3.50 and $4.00 price points,” experts at BMO Capital Markets said in a research brief on Monday.

Exceptional value

The people responsible for finding the assortment of products that have been critical in making the bargain chain so successful in recent years are hitting a bit of a wall, it seems.

“[They’re] not able to source a significant number of items that they believe would deliver ‘exceptional value’ at these higher price points, following Dollarama’s recent buying trip to China,” the BMO experts said.

Slow roll-out

BMO’s experts said they believe Dollarama will eventually get it right and find higher priced items shoppers will be as enthusiastic about. But they don’t foresee those products being a meaningful portion of sales this year.

“Management suggested that the roll-out of these products would be ‘very slow,’” the BMO note said.

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WATCH: Just like how buying certain items in bulk can save you money, buying specific items at your local dollar store can amount to big savings as well. Brian McKechnie reports.

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