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Why Target, Aldi, Walmart and others are really lowering prices for supermarket staples
Think Target - which this morning reported another drop in its sales - and other supermarkets are lowering grocery prices just to help you? Think again.
Target said Monday it is lowering prices on 5,000 everday products from milk to diapers as the big-box retailer looks to win customers from Walmart.
Earier this month, supermarket Aldi said it was dropping prices on more than 250 items. Walmart has this year used its 'rollback' promise to cut prices and, like Kroger, has invested in improving its own-label ranges.
'We know consumers are feeling pressured to make the most of their budget,' said Target's chief food officer Rick Gomez said - giving the impression the company was simply helping customers. It echoed what Aldi's boss had said.
But the real reason is simply down to business. With some grocery costs finally starting to fall after two years of punishing pricrei rises, supermarkets that are slow to pass them on will lose customers - fast.
That is exactly what is happening to Target. It announced this morning its sales for the first three months of 2024 are down on last year - which was its worst year in seven.
Target announced this week it is cutting the prices of 5,000 items
Price cut signs in Target
Retail experts point out how price sensitive American shoppers are - expecially as budgets are stretched to the limit.
That is exactly why Target went to town in unveiling its barrage of 5,000 price cuts - which it timed for a quiet Monday morning to get news headlines.
Target's revenue fell last year for the first time in seven years.
This morning - Wednesday, May 21 - it posted another decline in sales for the first quarter of this year, after higher prices cutin into shopper spending.
Target has been haemorrhaging customers to its big rival Walmart, which last week boasted it had boosted sales by four percent - a rare achievement among the recent set of earnings from retailers.
It achieved the sales jump - and predicted the rest of 2024 to be stellar too - after getting ahead of the curve on price cuts, retail experts said.
Walmart has been talking up how it is cheaper than rivals and had 'widened the gap' on prices.
University of Wisconsin economics assistant professor Andrew Stevens told local station WSAW-TV that lowering prices is often used as a marketing tool to get one up on rivals.
'Consumers definitely notice when prices go up on something, and tend to not notice when they go down on something,' he said.
'So, I think what we're seeing is Target trying to draw attention and pull consumers into their store and away from some of their competitors.'
Walmart last week said it had seen ts like-for-like sales jump almost 4 per cent for the first three months of the year.
CEO Doug McMillon spoke about how competitive prices at its 4,600 stores had attracted new customers.
'We've got customers that are coming to us more frequently than they have before and newer customers that we haven't traditionally had,' Walmart chief financial officer John David Rainey told CNBC.
He said the company has increased 'rollbacks,' which are price cuts on specific items that it highlights ith signs in its stores or on its website.
As earnings season begins to wind down, Target is reporting its quarterly results Wednesday and appears to making a bet on price cuts contributing to a positive outlook going forward.
Budget supermarket chain Aldi is also cutting prices
Aldi is known for selling various imitation products at significantly reduced prices. Pictured are Pringles on the left and Aldi's imitation product on the right
It said on Monday that the discounts will be spread out across dozens of national brands as well as Target's own brands, the company said - adding that these newest discounts are on top of price cuts it had already planned going into Memorial Day weekend.
One pizza brand will go down 20 cents and bagels down 40 cents.
Other key food items including meat, bread, fresh fruit and vegetables will be discounted going into Memorial Day weekend. Soda, various snacks and yogurts will also go down in price, Target said.
Meanwhile, Aldi said it would pass along $100 million in savings through Labor Day by further dropping its everyday low prices on more than 250 items.
'Aldi is always looking for ways to help customers save money, but with more experts warning of persistent inflation, the time was right to deliver even greater discounts on our already low prices for the second year in a row,' said Dave Rinaldo, president at Aldi US.
Walmart on April 30 debuted a private-label food line of 300 items with 70 percent priced under $5.
Meanwhilem Kroger in March said it planned to add more than 800 items to its 'Our Brands' private-label products, while Target is adding hundreds of new items to its 'Favorite Day' and 'Good &aGather' private-label food brands.