Dollar Tree's smaller pack sizes offer an advantage Costco can't match

When money is tight for consumers across the board, retailers like Dollar Tree and Costco tend to win out.

A good 66% of Americans have reduced their overall spending due to rising prices, according to the Conference Board's May Consumer Confidence Index.

April's Consumer Price Index, meanwhile, showed that a number of key costs rose substantially year over year. Gas prices increased 28.4% on an annual basis, while food costs rose 3.2%.

And when the cost of essentials like these increases, consumers often have to cut back on discretionary spending to make up for it.

This shift in consumer behavior has created different challenges and opportunities for retailers. And both Costco and Dollar Tree seem to be winning in today's environment.

Costco has clearly built its business around helping customers save money through bulk purchases. But Dollar Tree has a distinct advantage that resonates with cash-strapped shoppers.

Dollar Tree offers one benefit Costco does not

Costco's model is simple: buy more and pay less per unit. But while the warehouse club giant typically delivers outstanding value, there is a catch.

Customers have to spend more money upfront to get those savings.

A family might save money buying a 36-pack of paper towels, a giant container of laundry detergent, or a month's worth of snacks at Costco.

Related: Costco just lowered prices on key items

But that requires having enough cash available to make the purchase in the first place. And it also doesn't account for the cost of an annual membership just to walk in the door.

That's where Dollar Tree has an advantage.

Many shoppers today are focused on managing weekly cash flow rather than maximizing long-term savings. Smaller package sizes allow consumers to buy only what they need immediately, instead of making larger purchases that may strain their budgets.

Dollar Tree CEO Michael Creedon highlighted that advantage during the company's first-quarter 2026 earnings call.

"Customers value the ability to shop nearby and quickly to stretch their budgets through smaller and more affordable pack sizes and to still find a compelling assortment and discovery throughout the store," he said.

A shopper who only has $20 to spend this week may not be able to take advantage of Costco's bulk discounts. Dollar Tree's smaller pack sizes allow customers to reap savings without having to shell out large amounts of money in a single shopping trip.

Dollar Tree and Costco share more similarities than you might think

At first glance, Dollar Tree and Costco might appear to be opposites.

One sells small package sizes at low price points. The other encourages customers to buy in bulk. One operates neighborhood discount stores, while the other relies on massive warehouse locations and membership fees.

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Yet both retailers have succeeded because they understand value.

Costco has earned remarkable customer loyalty through its flexible return policy, commitment to quality, and strong Kirkland Signature brand.

Costco has also seen its fair share of success with its treasure hunt-style shopping experience. Members often visit for essentials but leave with unexpected purchases ranging from electronics to home goods to seasonal products.

Dollar Tree has developed its own version of that treasure-hunt model. Customers frequently stop in for basic necessities and discover holiday décor, party supplies, household items, or limited-time products they didn't expect to find.

Of course, Dollar Tree could learn a few things from Costco's success.

Costco has built trust by consistently delivering value and maintaining a disciplined merchandise strategy. The retailer also benefits from extremely loyal customers who make regular visits because they believe they'll find worthwhile deals.

Dollar Tree can continue strengthening its business by focusing on those same principles. And it seems to be doing that already.

"In this environment, our powerful combination of value, convenience, and discovery continues to resonate with customers across all income levels and a wide range of shopping occasions," as Creedon said during the company's most recent earnings call.

Costco may still be the king of bulk savings. But for consumers trying to manage tight weekly budgets, Dollar Tree has a practical advantage that even the warehouse giant can't match.

Maurie Backman owns shares of Costco.

Related: Dollar Tree expands service many customers can't afford

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This story was originally published June 9, 2026 at 6:03 PM.