Dollar Stores: Where Trumpian Sleaze Meets Affordability

The Guardian had a fascinating piece on how the Dollar store chains (both Dollar General and Family Dollar) seem to have a practice of advertising lower prices on their shelves than what they ring up at the register when the person checks out. The evidence they present in the piece indicates that these mispricing cases may account for more than 20 percent of all sales. Also, the errors are often large, as much as 50 percent of the shelf price.

The piece points out that retail pricing practices are regulated at the state level. States devote limited resources to checking prices, and even when they uncover cheating, the fines are typically too small to force changes in behavior.

This piece is striking for three reasons. First, insofar as this sort of cheating is common, it indicates that inflation could be greater than is generally recognized. Second, it brings home the problem of “affordability” in a way that many of us probably did not anticipate. If someone thought they were buying $80 of groceries, only to have the cash register ring up $100, it is understandable they would be upset. Finally, it shows how the Trump-Musk habit of laughing at consumer fraud has very real pocketbook effects.

Price Cheating Doesn’t Show Up in the Consumer Price Index 

Being an economics nerd, one of the first things that jumped out at me is that this sort of mispricing would not be picked up in our measures of inflation. To calculate the monthly Consumer Price Index (CPI), the Bureau of Labor Statistics (BLS) sends price checkers around to stores across the country. The price checkers examine the price listed on the shelf. This is compared to prices from prior months to calculate the CPI’s index for food prices.

If the Dollar chains are charging higher prices at the checkout counter than what they list on the shelves, the price checker from BLS would never see it. This would mean that they are understating the price actually paid by customers.

It’s not clear whether this sort of fraud is large enough to affect the CPI in any noticeable way. With annual sales of $60 billion (which includes many non-food items) the Dollar chains’ sales are a bit less than 4.0 percent of annual grocery sales. If this mispricing resulted in prices being undercounted by 10 percent at the Dollar stores, it would mean that inflation in food prices is understated by a bit less than 0.4 percent for this reason.

However, that would depend on the extent to which this is a new practice at the Dollar chains, as opposed to something they have done for decades. If the latter is the case, the impact on the inflation rate would be far less.

But if the Dollar chains get away with this cheating it is reasonable to assume other stores also do the same sort of cheating, even if not on the same scale as the Guardian has documented for the Dollar chains. This is potentially a major source of unmeasured inflation.

Getting Overcharged Is Likely to Anger People

Most people probably don’t make a practice of marking the shelf price of the items they purchase and comparing it to the register price, but they probably have a general sense of what their cart is going to cost them. If they find that the tab at the checkout counter is 5 to 10 percent more than what they had been expecting, they are likely to be more upset than if all the items were correctly charged.

This could partly explain why people seem even more unhappy with the economy than the official data may warrant. Of course, since we don’t have any data going beyond September, it’s difficult to say how much anger the official data should warrant at this point.

It also matters whether this is primarily a Dollar chain issue or if it applies to retailers more generally. It would take some footwork to answer this question, but my guess is that if companies know they can get away with cheating their customers, they probably do.

This is Where Trumpian Sleaze Directly Hits the Kitchen Table

Trump has made a point of laughing at efforts to rein in corporate abuses of all forms. He has gutted the Environmental Protection Agency, the National Labor Relations Board, and many other agencies created to protect consumers, workers, and the environment. His sidekick, Elon Musk, thought it was hilarious that he was “deleting” the Consumer Financial Protection Bureau, the agency set up to prevent banks, credits card companies, and other financial institutions from ripping off their customers.

The mispricing of items at the checkout counter by major retailers would seem to be exactly the sort of reason for which God created government. (Lawsuits should work also, except the piece indicates that the Dollar chains largely preempt class-action suits by requiring arbitration. Good luck getting a lawyer to sue for being overcharged $20.) Anyhow, Trump’s laugh-at-corporate-crime approach is directly pulling money out of people’s pocketbooks in this Dollar chain story.

What Trump apparently thinks is all good fun, is companies making people pay more for the necessities of life. Yesterday, Trump told people that affordability is a “con job.”  That could be right, although probably not quite in the way that Trump intended.

This first appeared on Dean Baker’s Beat the Press blog.

The post Dollar Stores: Where Trumpian Sleaze Meets Affordability appeared first on CounterPunch.org.