COLUMBUS, Ohio — Walgreens, Target and Walmart are just a few stores that have announced price markdowns on thousands of items this summer.
It's no secret that consumers have felt the effects of inflation when shopping for everyday items. According to the U.S. Department of Agriculture, August 2022 saw an inflation rate of 11.4%, which saw the highest rate of inflation of food since 1979. Although numbers have slowly started to come down since then, prices are still up 19.4% since January 2021.
Economic experts say the stability the past couple of months has given stores and companies the confidence to offer deals and price markdowns on certain items.
Walmart is offering rollbacks or price reductions on around 7,000 items. Target isn’t far behind, offering price cuts on around 5000 items. Walgreens will cut prices on about 1,300 national and store brand products along health and wellness. Aldi is passing along about $100 million in savings, and Amazon Fresh said U.S. customers can save 30% on 4,000 weekly rotating grocery items every day.
Part of what’s driving these cuts are big chain stores feeling the shift in shoppers' discretionary spending. Retail stores that have been open at least a year saw a 4.3% decline in sales this quarter. Economic professor, Jonathan Ernest, says that this initiative from companies might be a result of lower production cost as well as increased competition.
“When consumers start to find out that they're competing, restaurants are starting to price in those lower prices and lurer your customers away, and then you need to follow suit and also lower prices,” said Ernest. “It's a little bit easier for prices to be pushed up in a lot of these areas then for them to fall as quickly, and so we might see sort of a quick ramping up of prices and then a slow fall over time as businesses try to outcompete each other.”
Ernest said companies are offering price cuts just for the summer as a way to test the consumer market without looking inconsistent or unreliable if they have to mark prices back up. This summer could be a good indicator of how consumers could expect overall inflation to move.
“What we see here is that things are getting cheaper and so the measure of inflation might continue to come down,” said Ernest. “That could have impacts for the Federal Reserve finally deciding to cut rates to make sure that the economy is not slowing too much and keep consumers kind of in a nice equilibrium of being out there buying things.”
If companies see increased spending that’s able to keep up with or surpass previous quarterly numbers, then it’s likely the summer prices could live on longer, but Ernest doesn’t believe that we’ll see prices drop to pre-pandemic levels.
Correction: This story previously misspelled Jonathan Ernest's name. This has been corrected. (June 11, 2024)