[Report] "From $1.99" The Betrayal of US Dollar Stores... Biden's Biggest Challenge is 'Inflation'

Product prices mostly start around $2
Despite inflation slowdown, perceived living costs remain high
80% of voters say "Inflation is the biggest stress"

A dollar store located between 5th Avenue and West 46th Street in Manhattan, New York. Opened in the early 2000s under the name 'Fifth Avenue Dollar and Discount,' this store has sold groceries and various daily necessities at low prices to low-income residents in the heart of Manhattan, notorious for its high cost of living, for the past 20 years. It is one of the 'dollar shops' that use a strategy of distributing high-quality products for 1 dollar (about 1,320 won).

However, when visiting the store on the afternoon of the 6th (local time), there were no products priced at 1 dollar to be found. Although large dollar store chains like Dollar Tree raised their product prices from 1 dollar to 1.25 dollars in 2021, considering that this store is run by an individual business owner, the prices here were much higher. Most products had price tags around 2 dollars, and many items exceeded 3 or 5 dollars. Even the cheapest products, ranging from bathroom and kitchen consumables to stationery, snacks, beverages, and frozen foods, mostly started at prices in the high 1-dollar range.

Throughout the store, large signs stating '1.99 dollars per item' were noticeable. However, at the bottom of the signs, in small print, there was a caveat: 'If price not mark.' Looking at the products on the shelves, it was easy to see many items with price tags in the 2 to 3 dollar range. It was closer to a '2-dollar shop' rather than a dollar shop.

On the 6th, a consumer is purchasing groceries at a dollar store located in Manhattan, New York. Although a paper sign on the store ceiling reads "1.99 dollars per item," most of the products displayed on the shelves were priced higher than 1.99 dollars. Khan, a store clerk, said, "Over the past 2 to 3 years, with raw materials, labor costs, and logistics expenses all rising, we had no choice but to raise product prices several times." New York ? Photo by Kwon Haeyoung

On the 6th, a dollar store located in Manhattan, New York. Inside the store, there is a phrase that reads, "Thank you for shopping where dreams cost 99 cents." New York ? Photo by Kwon Haeyoung

The store clerk, Khan, said, "When we opened in the early 2000s, we started as a dollar shop, but strictly speaking, we are no longer a dollar shop." He added, "Over the past 2 to 3 years, with increases in raw materials, labor costs, and logistics expenses, we had no choice but to raise the prices of the products sold in the store several times."

Price increases are ongoing. The store raised the price of the popular American beverage 'Snapple' by 0.1 dollars last week and plans to raise it again by 0.25 dollars to 2 dollars within this week. Khan said, "Since companies raise supply prices, we also raise our selling prices," adding, "No retailer wants to raise prices for consumers."

The 'betrayal of dollar shops' in the U.S. continues. Due to inflation sustained over the past 2 to 3 years, dollar shops have been continuously raising product prices. According to recent reports by the U.S. business magazine Fortune, large dollar store chains like Dollar Tree and Dollar General have come under scrutiny for raising product prices through shrinkflation?the practice of reducing product quantity while keeping prices the same. Although inflation indicators are slowing down, there are concerns that the cost of living felt by American consumers remains high. Accordingly, inflation is considered the biggest economic issue for President Joe Biden, who is seeking re-election this November.

The inflation indicators themselves are on a downward trend. The annual increase rate of the U.S. Consumer Price Index (CPI) fell from 9.1% in June 2022 to 3.1% in January this year. Federal Reserve Chairman Jerome Powell also stated that while more certainty is needed regarding further inflation slowdown, "there has been significant progress with a sharp slowdown since mid-last year."

However, consumers still do not feel the inflation slowdown due to the persistently high cost of living. According to the U.S. economic daily The Wall Street Journal (WSJ), the proportion of food expenses in disposable income for Americans in 2022 was 11.3%, the highest in 31 years since 1991 (11.4%). This is a result of the sharp rise in grocery and dining prices over the past few years. Although the inflation trend has eased, wage increases have not kept pace, which is a major reason. Additionally, excess savings accumulated during the COVID-19 period have been depleted. Despite the U.S. economy's robust growth rate and strong employment, the harsh evaluation of 'Bidenomics' is rooted in inflation like this.

The urgency of inflation as the most pressing issue for President Biden is also confirmed by public opinion polls. According to a survey released by major foreign media and the University of Michigan's Ross School of Business on the same day, 80% of 1,010 voters identified inflation as their biggest stress factor. The survey showed that 48% of respondents evaluated their household financial situation positively, and 30% viewed the U.S. economic conditions positively, increases of 5 percentage points and 9 percentage points respectively from the November survey last year. On the other hand, support for the Biden administration's economic policies remained at 36%, the same as in November last year. Those who do not support his economic policies were 59%, a decrease of only 2 percentage points during the same period. Considering that nonfarm payrolls increased by 275,000 in February, exceeding market expectations (198,000), and that the January personal consumption expenditure (PCE) price increase rate fell to the 2% range, the strong economy has not translated into improved support for the Biden administration. In response, President Biden has increased his criticism of companies, pointing to shrinkflation.

Mark Hamrick, senior economic analyst at Bankrate.com, diagnosed, "Inflation has taken away about one-fifth of people's purchasing power," adding, "The president's statement that inflation is slowing and wages are rising is correct, but it is hard to say that inflation is not as bad as before."

Eric Gordon, professor at the University of Michigan's Ross School of Business, said, "It is bad news for President Biden that negative evaluations of him in the economy outnumber positive ones," and assessed, "The president's messages and economic indicators are not moving voters in the way he wants."