NEW YORK — Americans who spend Memorial Day chasing sales online and in stores may find more reason to celebrate the return of warmer weather. Major retailers are ramping up discounts as the summer months approach, hoping to attract buyers tired of inflation to open their wallet.
Target, Walmart and other chains have implemented price cuts — some permanent, some temporary — with the stated goal of providing relief to their customers. The discounts, which mainly concern groceries, are being introduced gradually inflation showed its first signs of easing this year, but not enough for consumers who are struggling to pay for basic necessities as well as rent and car insurance.
The latest quarterly results published by Walmart, Macy’s And Ralph Lauren stressed that consumers have not stopped spending. But several CE0s, including executives at McDonald’s, Starbucks and a home improvement retailer Home deposit, observed that people are increasingly price-conscious and demanding. They are delaying purchases, focusing on store brands over the generally more expensive national brands, and looking for deals.
“Retailers recognize that if they don’t do some work on pricing, they will struggle to retain the customers they have acquired,” said Neil Saunders, managing director of the consulting and analytics firm GlobalData data. “The consumer is really fed up with inflation, and they’re starting to take action in terms of where, how they shop, how much they buy.”
While discounts are an everyday tool in retail, Saunders said these aggressive price cuts that cover thousands of items announced by a number of retailers represent a “major shift” in recent strategy. He noted that most companies have been talking about price increases over the past two or three years, and that this drop marks the first major “price war” since before inflation began to take hold.
WHERE CAN BUYERS FIND LOWER PRICES?
Higher-income buyers looking to save money helped Walmart maintain strong sales in recent quarters. But earlier this month, the nation’s largest retailer extended its price cuts — temporary discounts that can last a few months — to nearly 7,000 grocery items, a 45% increase. Items include a 28-ounce can of Bush’s Baked Beans for $2.22, down from $2.48, and a 24-pack of 12-ounce Diet Coke for $12.78, up from $14. $28.
Company executives said the Bentonville, Arkansas-based retailer is seeing more people eat at home rather than eating at a restaurant. Walmart believes its discounts will help the company for the rest of the year.
“We’re going to lead on price, we’re going to manage our (profit) margins, and we’re going to be the Walmart we’ve always been,” CEO Doug McMillon told analysts earlier this month.
Not to be outdone by its closest competitor, Target last week lower prices on 1,500 items and said it plans to cut prices on another 3,500 copies this summer. The initiative mainly applies to food, drinks and essential household items. For example, Clorox scented wipes that previously cost $5.79 are on shelves for $4.99. Huggies baby wipes, which used to cost $1.19, are now 99 cents.
Low cost Aldi supermarket chain said earlier this month it was slashing prices on 250 products, including barbecue and picnic favorites, in a promotion that would last through Labor Day.
McDonald’s plans to introduce a limited time $5 meal agreement in the United States next month to counter the slowdown in sales and customers frustration with high prices.
Arko Corp., a leading operator of convenience stores in rural areas and small towns, is launching its most aggressive offerings in terms of scale in about 20 years, both for members of its free loyalty program and for other clients, according to Arie Kotler, the company’s chairman, president and CEO. For example, members of Arko’s free loyalty program who purchase two 12-packs of Pepsi drinks receive a free pizza. The promotions started on May 15 and are scheduled to end on September 3.
Kotler said he focused on essential products that people use to feed their families after observing that the cumulative effects of rising gas prices and inflation in other areas had held back customers compared to a year ago.
“Over the last two quarters, we have seen a trend of consumers reducing their purchases, coming in less often and reducing their purchases,” he said.
In the non-food category, craft chain Michaels last month reduced prices on frequently purchased items like paint, markers and artist canvases. Price reductions ranged from 15% to 40%. Michaels said the cuts should be permanent.
DO THESE REDUCTIONS BRING PRICES BACK TO PRE-PANDEMIC LEVELS?
Many retailers said their goal was to offer some relief to shoppers. But Michaels said its new discounts brought prices of some products back to where they were in 2019.
“Our intention with these reductions is to ensure that we provide value to the customer,” The Michaels Companies said. “We view it as an investment in customer loyalty more than anything else.”
Target said it is difficult to compare the current cost of its discounted products over a specific period of time because inflation levels are different for each item and discounts vary by item.
The Bureau of Labor Statistics, which tracks consumer prices, said the average price of a two-liter bottle of soda in April was $2.27. That compares to $1.53 the same month five years ago. A pound of white bread averaged $2 last month, but $1.29 in April 2019. A pound of chopped bread that averaged $5.28 in April cost $3.91 five years ago.
WHY DO COMPANIES REDUCE THE PRICES OF CERTAIN ITEMS?
American consumer confidence The situation deteriorated for the third straight month in April as Americans continued to worry about their near-term financial future, according to the latest report released late last month by the Conference Board, a research group. economic.
As shoppers focus more on bargains, especially online, retailers are trying to attract customers back to their stores. Target this month recorded its fourth consecutive quarterly decline in comparable sales – those from stores or digital channels that have been in operation for at least 12 months.
In fact, the share of online sales for the lowest-priced items in many categories, including clothing, groceries, personal care and appliances, increased from April 2019 to the same month this year, according to Adobe Analytics, which covers over 1 trillion internet visits. US retail locations.
For example, the market share of the cheapest food products increased from 38% in April 2019 to 48% last month, while that of the most expensive food products fell from 22% to 9% over the same period, according to Adobe.
HOW DO RETAILERS FINANCE PRICE DROPS?
GlobalData’s Saunders said he believes companies are subsidizing price cuts through a variety of methods: at the expense of profits, at the expense of suppliers and sellers, or at the expense of suppliers. by reducing expenses. Some retailers might use a combination of all three, he said.
Saunders doesn’t think retailers are raising prices on other items to make up for those they’ve lowered, because that would lead to a backlash from customers.
Target declined to disclose details, but said its summer pricing promotion was priced into the company’s projected profit range, which falls below analyst expectations at the low end.
GPM Investments, LLCa wholly owned subsidiary of ARKO Corp. said its suppliers financed convenience store promotions.