Retailers cut prices in 'summer of savings,' but consumers need to shop smart for best deals

After more than a year of cost hikes, consumers who have recently checked their receipts may have noticed something odd — prices for some of their everyday essentials, from Clorox wipes to organic granola bars, have started to ring up a little cheaper.

In what at least one retailer has dubbed "a summer of savings," big retailers like Target, Walmart and Walgreens as well as grocery chains like Aldi have cut prices on thousands of common items as they try to woo customers on the hunt for value. On top of those savings, the industry is in the midst of midyear seasonal sales that include Target Circle Week, which began last weekend, and Amazon's Prime Day, which starts next week.

For months, consumers have felt the choking squeeze of rapid price increases. During the pandemic, there was a dearth of deals when inventory levels were sporadic. For cost-conscious shoppers, this heavily promotional period feels like a breath of fresh air.

"Price is very important to me," said stay-at-home mom Chantel Wiskur as she shopped with her two young sons at the new Aldi in Ramsey, Minn., on Thursday. Wiskur immediately noticed Aldi had recently lowered the price of freeze-dried apple slices and organic strawberries, a favorite snack of her 1-year-old son.

"I've definitely seen a decrease," she said. "I used to get a couple of [bags of fruit], and now I get a lot."

Focus on affordability

It's an era of deals.

Major retailers are publicizing their price cuts as they openly acknowledge why — more promotions to stay competitive — and each cut seems to have a domino effect. In mid-May, Walmart announced it was reducing prices on 7,000 items, including food. Days later, Minneapolis-headquartered Target Corp., which has had a year of sales declines, said it was cutting the price of 5,000 food, beverage and household essentials items.

Even though the growing amount of cheaper merchandise is a small percentage of their total inventory, corporations know they have to keep prices relatively low as shoppers focus on affordability.

"Our commitment to investing in price on behalf of our guests is to pass savings back along to them to accelerate traffic and unit growth over time," said Christina Hennington, Target's chief strategy and growth officer in a recent earnings call with analysts.

Leaders at Amazon's Amazon Fresh and Whole Foods grocery stores have said their prices have been reduced. Walgreens said it continues to lower prices on more than 1,300 items, including mini pretzels and sanitary pads.

Discount grocery Aldi announced this summer it would lower the prices of hundreds of groceries, including sirloin steak and frozen blueberries. A couple hundred customers lined up around the block to await the opening of its new Ramsey store, a testament to the lure of savings.

"A lot of people, because of inflation, had to work on smaller budgets. A lot of people, because of inflation, had to start to explore private label dollar stores, and so I think what you are seeing now is a reaction to that," said Mark Bergen, a marketing professor at the University of Minnesota's Carlson School of Management. "The world has changed, and store brands, private labels, discount retailers, they are all a much bigger part of customers' lives, and so the price pressure on manufacturers and retailers, I think, is real and changing and long term."

The barrage of price cut announcements likely was a marketing move to sound the sales siren, said Dhruv Grewal, a marketing professor at private Massachusetts business school Babson College.

"The moment one starts to price discount or offer lower prices on essential items ... if you are not offering it, you will likely start losing customer visits," he said.

When expenses for retailers and manufacturers go down, it makes sense to pass savings on to consumers, Grewal said.

"I think some of these retailers have had pretty good returns," he said.

Hunting for best prices

Price, always a factor for consumers, has become an even bigger determinant of where and how people choose to shop.

"It has become more part of the fabric of shopping, and it does challenge the brand loyalty," said Bergen, who for decades has studied pricing strategies and industry price wars. "Price was the driver, so these lower-priced options are becoming a bigger part of how we purchase, how we buy and who we are as shoppers. That does fundamentally change the competitive landscape putting price pressure on the more traditional retailer."

It's a critical time for retailers and manufacturers. Consumers are more in the driver's seat, and retailers have to respond, said Sally Lyons Wyatt, global executive vice president and chief adviser for consumer goods and food service insights for Circana, a consumer behavior firm.

"They are trying to get traffic to come into their store," she said. "They need to have the traffic to boost their sales. In order to do that, though, they have to entice with pricing."

Several pricing and consumer packaged goods experts have stopped short of labeling the current atmosphere a "price war," which while temporarily beneficial for consumers, can ultimately put manufacturers out of business and lead to fewer product choices.

Retailers, though, have become more sophisticated with their pricing strategies. They have more data on which items they need to sell at lower prices to regain market share, Bergen said. They're also utilizing purchasing data to better understand customers' shopping patterns, allowing them to offer deals catered to an individual shopper.

Algorithms aside, shoppers still have to shop smart in order to reap the benefits of these new savings. That means doing price comparisons, avoiding more expensive items not on sale and paying attention to what forms of payment and loyalty programs they use at different stores, grocery industry consultant David Livingston said.

"Retailers are rewarding customers for their loyalty," he said. "Customers willing to navigate all the apps and loyalty programs can do quite well. Consumers who do their homework are rewarded. Those who don't will overpay."