Is it real? Or is it an elaborate promotion designed to make you THINK you’re getting a great new deal? Several of the continent’s top ‘discount’ retailers are trumpeting that they’re dropping prices on thousands of products – including food…
There’s hardly any more-contentious ‘family level’ issue on the table today than food prices. And the folks who sell food are well aware. Now, two of America’s biggest discounters are making big promo-tional hay about dropping prices on thousands of products. All in the name of helping consumers…
The official message
Walmart is the latest major food retailer to implement price reductions on ‘more than 7,000’ pro-ducts, in the name of providing consumer budget relief. Many of those items will be foods. And the selection is expected to span the full range of grocery products.
So, ‘Hooray!’ for Walmart, right? Maybe… But the circumstances warrant a close look at the ‘small print’.
Walmart CEO Doug McMillion told the audience for his Q2 2024 investors’ conference call that some 7,200 products will be featured under the next seasonal ‘Rollbacks’ campaign. It’s the follow-through on a promise earlier this year to reduce food prices specifically, as consumers struggle to feed their families.
‘Less upward pressure’
“As it relates to value, we’re lowering prices,” McMillion said. “We have less upward pressure [on food prices], but there are some that are still talking about cost increases, and we’re fighting back on that aggressively because we think prices need to come down.”
At the same time as it promised price reductions, the chain reported Q2 earnings that ‘surpassed Wall Street’s expectations’. But McMillion was quick to credit that increase to increased sales volume in certain product categories.
He also noted that upper-income families have started to shift their grocery sourcing to Walmart to cut increasing food expenses. That, alone, is a noteworthy economic revelation.
The marketing ploy?
But Walmart is not going to let its own fortunes, or its shareholders’, suffer to produce those savings, though. McMillion explained that it’s increasing pressure on its suppliers to reduce prices so those savings can be passed on to the retailer’s customers.
“A rollback is Walmart’s in-house term for temporary price reductions on select items, and it’s been a centerpiece of the retail giant’s pricing strategy for decades,” Retail Brew reports.. Walmart CFO John David Rainey described Rollbacks as, “a good way for us to test elasticities of prices and see how customers respond before maybe we make something more permanent.”
I immediately wondered just what ‘elasticities’ means? The Retail Brew story didn’t elaborate. But I suspect it has to do with testing how high a price the retailer can set an item at before consumers stop buying it in the volume the store wants to see. (Or maybe I’m just an old curmudgeon whose imagination can’t resist a juicy conspiracy theory…)
What’s in it for us?
Walmart’s grocery Rollback discounts usually range from 10 to 30 percent. Many factors are involved, including supplier negotiations, the type of product and seasonal availability.
One thing to note is, Walmart has long employed Rollback discounts part of its continuing marketing model. Other grocers discount differently. They generally rely on ‘manager’s specials’, ‘manufacturer discounts’ and ‘clearance prices’ to attract shoppers’ attention.
Back in February, Loblaw’s quietly instituted a ‘Hits of the Month’ campaign which intentionally cuts prices on, “favourites and pantry staples like crackers, rice, flour, cooking oil, soap, nuts, and choco-late bars.” Alas, the ‘Hits’ program only features 3 or 4 fan fave products a month.
My take
Target and Amazon announced similar food price reductions, on broad ranges of products, earlier this year. The result has been a microcosmic price war of sorts between the discounters.
The bottom line here, seems to be that there has never been a better time to shop the discount stores’ discounts!
~ Maggie J.