Dollarama has been a cheap solution for a lot of household needs, and their variety of products only seems to be growing. With the loonie continuing to decline however, the Montreal based retailer may be forced to change its business model.
The weak Canadian dollar is forcing Dollarama to raise prices, and could potentially see its current price threshold of $1 rise to $3, or even $4 by late 2016.
“The probability is in the third and fourth quarter of next year, we’ll have to move our price points up,” CEO Larry Rossy told The Star while discussing the latest results.
“In general, we like to maintain our prices as long as we can, but this is really an exceptional time where the Canadian dollar has gone so poorly against the U.S. dollar and everything is bought in U.S. dollars. So to absorb 25 to 35 per cent (in currency swing) is almost impossible.”
Company executives are planning a trip to China in October, and hope to gain more clarity on pricing. According to Rossy, Dollarama purchases most goods for .25 to .35 cents, and sells them for $1 to $1.25. However, China is steadily increasing their prices, which heavily decreases the profit margin.
Although the situation seems unavoidable, the increase in price is sure to ‘turn off’ Canadian consumers from shopping at the discount retailer and find the next cheap alternative.
Image via thecentremall