Bargain Blitz: who's to win?

2024 has been a year in which the retail scene in the United States of America has changed noticeably, with major price cuts across numerous sectors. This strategic initiative by major retailers attempts to relieve the financial burden on consumers dealing with sustained inflation and declining purchasing power.

It's fundamental to underline is the fact that past four years cumulative inflation for many of those items overpass the 20%, as mentioned by NerdWallet. 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 with $1.53 in the same month five years ago.

As reported by national media, major retailers have implemented substantial price cuts on essential items, including groceries, household goods, and personal care products. 沃尔玛 has expanded its price rollbacks to nearly 7,000 grocery items. 塔吉特百货 has announced price reductions on approximately 5,000 popular items, with plans for further cuts on an additional 3,500 products this summer. 亚马逊 also?announced?last week that it will cut prices on 4,000 grocery items in-store and online. ALDI USA , known for its low-cost offerings, has cut prices on over 250 items, primarily targeting seasonal products. Walgreens is cutting prices on 1,500 items. Giant Food, Ikea, Michael’s, among other nationwide retailers have implemented this practice as well.

According to a recent survey from Advantage Solutions, almost 60% of shoppers said they have changed their purchasing behaviors during the last months. Reading many reports, studies and other findings, there is relevant data and enough evidence revealing that:

• Consumers are cutting back expenses
• Customers are shifting purchases to low price retailers
• Shoppers are focused on bargains, especially online
• Over 50% of middle-class Americans have cut back on non-essential spending
• Consumer confidence has eroded, is still positive but diminishing
• Small business confidence seen the same situation as consumer’s
• Inflation is “sticky”, declining vs previous year but with up & downs that do not allow it to cool down as expected
• Companies have concerns around discretionary spending, e.g. consumer pulling back on electronics and appliances

Retailers are struggling to maintain margins, strengthening negotiations with manufacturers, becoming with new ways to attract shoppers. Brands are doing the best they can to maintain top of mind, consumer preference and finally, positive purchasing decision.

Consumers are facing affordability challenges, there is less money to be spent especially when analyzing age as well as social-economic brackets. Households have been forced to prioritize essential purchases and stretch their budgets further. To better understand this, it’s instrumental to double click on specific categories, demographics, geographies and even seasonality.

The aggressive price cuts have been described by some analysts as a "major shift" and the first significant "price war" since before inflation began to escalate. It seems we are crossing through a complex interplay between consumer demand, industry dynamics, and economic factors shaping the retail landscape.

Long-term impact of these price reductions remains uncertain, their sustainability of is questionable. All these factors impacting brand image as well as company performances, leading to a somehow difficult to foresee scenario. One shall remain “positively cautious” for the time being.