Price Pendulum Swings Back to Discounts, Within Limits

U.S. consumers, fatigued by a three-year bout of inflation, want lower prices. And large retailers that have increased prices, partly to contend with their own rising costs, appear to be responding to customer concerns — to an extent.

Walgreens said last week that it was lowering prices on over 1,000 items. Target recently announced modest price cuts on 5,000 food products and household goods. Craft and furniture stores like Michael’s and Ikea have also said they will drop prices on popular items.

A broader range of companies have indicated on quarterly earnings calls that they plan to slow price increases and seek other ways to expand profitability.

Signaling empathy with customers facing higher living costs is an increasingly important marketing strategy, retail analysts say. But regardless of motivation, a shift is in motion that may help ease inflation in the coming months.

“Retailers have recognized they have to make some movement on pricing because the customer now is getting to the point where they’re shopping around more, they’re cutting down on the amount that they buy,” said Neil Saunders, managing director at GlobalData Retail, a research and consulting firm.

In some ways, the industry seems to be entering a new phase.

After a slog for retailers during much of the 2010s, when they often resorted to heavy discounts to gain or maintain market share, the pandemic upended consumer habits. Suddenly, bank accounts were buoyed by emergency federal aid, and millions of consumers unable or unwilling to spend on in-person services shifted to buying goods.