Dollar Tree Mounts Online Challenge to Costco, Staples and Small Business Suppliers

(MoneyWatch)  Warehouse clubs and office supply stores are withstanding a challenge for their small business customers from what might seem an unlikely rival, a newly enhanced Dollar Tree web site.

Indeed, the dollar store operator is not only challenging better established retailers for small business customers but for sales generated by organizations and individual bulk buyers, too.

In many ways, the Dollar Tree move is timely, as an important opportunity to attract new, bargain hunting customers to the company's stores and web site ends with the recession. Despite relatively strong results, Wedbush Morgan analyst Joan Storms downgraded the company's shares from buy to hold earlier this month, with improved macroeconomic data one reason for her action.

Internet commerce might not seem like a practical endeavor for a retailer that sells items for a dollar or less, but the company is pursuing on line sales by selling in case quantities.

Dollar Tree already runs a division dedicated to small businesses, organizations and bulk buyers. Dollar Tree Direct takes orders by phone but now will provide services through the company's web site as well. After nearly three years of selling in case quantities, the company decided the time was right to provide a full-on electronic commerce operation.

Under the designation School & Office Supplies, the Dollar Tree web site offers merchandise such as envelopes and legal pads that represents potential bulk buys for any number of small businesses, community groups and self-employed shoppers, among others, but the company also organizes its Internet business to address the particular needs of specific business sectors. So, it pays special attention to the needs of florists and gift shop owners with Floral Supplies and Décor, a category that includes vases, picture frames and glass candle holders. Recently, it offered four styles of vase at $1 each in 12- or 24-unit cases. Other designations include Party Supplies, Arts & Crafts, Toys, Games & Activities, Cleaning, Storage & Hardware, Kitchen & Tableware and even Teacher's Corner, where activity books, flash cards and student certificates are among the items listed.

To make it all viable, Dollar Tree offers free shipping direct to store -- and it has over 3,600 locations with plans to add 210 namesake stores this year -- so that a $12 case of vases doesn't become 50 percent more expensive with delivery.