NEW YORK — Americans scouting Memorial Day online and in stores may find more reasons to celebrate the return of warmer weather. Major retailers are ramping up discounts ahead of the summer months, hoping to entice inflation-weary shoppers to open their wallets.
Target, Walmart and other chains have implemented price cuts — some permanent, some temporary — with the goal of providing some relief to their customers. The cuts, which mainly affect groceries, come as inflation showed its first signs of easing this year, but not enough for consumers struggling to pay for basic needs, rent and car insurance.
The latest quarterly results from Walmart, Macy’s and Ralph Lauren underlined that consumers have not stopped spending. But several CE0s, including the heads of McDonald’s, Starbucks and Home Improvement Retailer Home Depot, have noted that people are becoming more price-conscious and picky. They are delaying purchases, focusing on store brands compared to typically more expensive national brands, and looking for deals.
“Retailers are realizing that unless they make some moves on pricing, they will struggle to retain the customers they have,” said Neil Saunders, director of consulting and data analytics firm GlobalData. “The consumer has really had enough. of inflation, and they’re starting to take action on where they shop, how they shop, the amount they buy.”
While discounts are an everyday tool in retail, Saunders said these aggressive price cuts covering 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 the cut marks the first major “price war” since before inflation took hold.
Higher-income shoppers looking to save money have helped Walmart maintain strong sales in recent quarters. But earlier this month, the nation’s largest retailer extended its price rollbacks — temporary discounts that could last a few months — to nearly 7,000 groceries, a 45% increase. Items include a 28-ounce can of Bush’s Baked Beans, marked down to $2.22, from $2.48, and a 24-pack of 12-ounce Diet Coke, priced at $12.78, from $14.28.
Company executives said the Bentonville, Arkansas-based retailer is seeing more people eating at home than dining out. Walmart believes the discounts will help the company through the rest of the year.
“We’re going to lead on price, and we’re going to manage our (profit) margins, and we’re going to be the Walmart that we’ve always been,” CEO Doug McMillon told analysts earlier this month.
Not to be outdone by its nearest competitor, Target cut prices on 1,500 items last week and said it planned to make another 3,500 price cuts this summer. The initiative mainly applies to food, drinks and essential household items. For example, Clorox scented wipes that previously cost $5.79 are hitting shelves for $4.99. Huggies Baby Wipes, which cost $1.19, now cost 99 cents.
Discount grocery chain Aldi said earlier this month it was cutting prices on 250 products, including barbecue and picnic favorites, as part of a promotion that would last through Labor Day.
McDonald’s plans to introduce a limited-time $5 meal deal in the US next month to combat slowing sales and customer frustration over high prices.
Arko Corp., a major operator of convenience stores in rural areas and small towns, is launching its most aggressive deals in terms of depth in about two decades for both free loyalty program members and other customers, Arie Kotler said. chairman, president and CEO of the company. For example, members of Arko’s free loyalty program who purchase two 12-packs of Pepsi drinks will receive a free pizza. The promotions started on May 15 and will end on September 3.
Kotler said he focused on essential items people use to feed their families after noticing that the cumulative effects of higher gas prices and inflation in other areas had made customers cautious compared to a year ago.
“Over the past two quarters, we have seen the trend of consumers cutting back, consumers cutting back on shopping and consumers reducing their purchases,” he said.
In the non-food category, craft chain Michaels last month reduced the prices of frequently purchased items such as paint, markers and artist canvases. The price reductions ranged from 15% to as much as 40%. Michaels said the cuts are permanent.
Many retailers said their goal was to provide some relief to shoppers. But Michaels said the new discounts have brought prices down to 2019 levels on some things.
“Our intent with these cuts is to ensure we deliver value to the customer,” The Michaels Companies said. “More than anything else, we see it as an investment in customer loyalty.”
Target said it was difficult to compare what its discounted products now cost in a specific time frame 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 in the same month five years ago. A pound of white bread averaged $2 last month, but $1.29 in April 2019. A pound of ground bread that averaged $5.28 in April cost $3.91 five years ago.
U.S. consumer confidence deteriorated for a third straight month in April as Americans continued to worry about their near-term financial future, according to the latest report published late last month by the Conference Board, an industry research group .
As shoppers focus more on bargains, especially online, retailers are trying to lure customers back to their stores. Target this month posted its fourth consecutive quarterly decline in comparable sales – those from stores or digital channels that have been active for at least 12 months.
According to Adobe Analytics, the share of online sales for the cheapest items across many categories, including apparel, groceries, personal care and appliances, increased from April 2019 to the same month this year, amounting to more than 1 trillion visits to U.S. retail sites.
For example, the market share for the cheapest groceries rose from 38% in April 2019 to 48% last month, while the market share for the most expensive groceries fell from 22% to 9% in the same period, according to Adobe.
GlobalData’s Saunders said he thinks companies are subsidizing price cuts in different ways – at the expense of profits, at the expense of suppliers and vendors, or by cutting costs. Some retailers may use a combination of all three, he said.
Saunders doesn’t think retailers are raising prices on other items to make up for the prices they’ve cut, because that would cause a backlash among customers.
Target declined to release details but said the summer price promotion was included in the company’s expected profit margin, which falls on the lower end of analysts’ expectations.
GPM Investments, LLC, a wholly owned subsidiary of ARKO Corp., said its suppliers finance the supermarkets’ promotions.
