Trade War May Pump Up Prices at 99 Cent Stores

Most of the items in the 99-cent stores come from China. (Photo by Lan Mu via World Journal)

Ninety-nine cent stores have been attracting many bargain hunters with their low prices. But customers may be hit with a price increase at these low-end shops during the holiday season. With the trade war between China and the U.S. making products from China more expensive, profit-squeezed shops are left with few options.

According to a Queens College study, there were 1,247 99-cent stores in New York in 2015, and a substantial portion of them were Chinese-owned. Linda Huang, owner of a 99-cent store located in a basement on Main Street, Flushing, said that right after the trade war began, many customers came to ask whether prices would go up. Indeed, in early October, she had already received notice from the wholesalers telling her that the prices of most of the products in her shop would rise because of higher tariffs.

But Huang said, facing sharp competition from other 99-cent stores on Main Street, she has to stick to the principle of such shops and keep the prices low. Even if the prices have to go up, she’ll try her best to limit the increase. This means her profit will be even thinner. But she is ready to take a loss in order to maintain enticing prices.

Alice Wu, who runs a 99-cent store on Northern Boulevard in Flushing and a wholesale store of imported items in Brooklyn, said 70 percent of the goods in her shops come from China. Many of them are priced under $10, from which she makes about 50 cents per item.

Wu said 99-cent stores rely on imported goods and make a profit from geographic disparities. The trade war between China and the U.S. as well as the rising labor costs in China greatly affect the stores. She said some garment factories in China that had been providing products to her have closed or moved on to other industries so she is facing a supply shortage.

Huang said the skyrocketing rents in Flushing also play a role in this perfect storm. Her store’s rent, even being located in a basement, is about $6,000 per month with an annual increase of 3 percent. Even if the store is filled with customers, the profit is still meager after all the costs.

It is possible that the tariffs will be even higher next year. But Huang said it’s hard for the 99-cent stores serving Chinese customers to switch to cheaper items from other countries. “India doesn’t produce the products that Chinese customers need, and it is not realistic for our Chinese suppliers to send raw material to India or Vietnam and get the products manufactured there,” she said. “That would increase the costs anyway.”

But Huang played down the impact of rising prices for customers during the holiday season. “We mainly serve Chinese customers. A hot item for them during the holiday season is gift bags. Even if we have to raise the price, it will just be a few more dimes,” Huang said.

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