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Published: Apr 24, 2024 5 min read
Michaels store entrance
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With inflation moderating, some U.S. retailers are beginning to lower their prices to lure back shoppers previously turned off by big price tags.

Nearly three years of dealing with elevated inflation led Americans to broadly change their shopping habits: They started opting for private-label products, switching to cheaper retailers or cutting out certain non-essential purchases entirely. Retailers want those shoppers back, and major brands such as Walmart, Whole Foods, Ikea and others are willing to slash prices across several categories to win them over.

“Freight costs are lower, and input costs are also moderating, so retailers can afford to take those lower costs and pass them on to the consumer,” Mickey Chadha, vice president of corporate finance at Moody’s, says in an email.

Foods like eggs, dairy and cereal as well as products including toys, furniture, major appliances and electronics are all cheaper now than last year, according to the Labor Department.

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Which stores are lowering prices — and why

When certain items get cheaper to produce, it gives wiggle room to retailers to lower shelf prices.

The price cuts could also be due to mounting pressure from the White House. For months now, President Joe Biden has been demanding that retailers bring consumer costs down, telling them earlier this month to "use record profits to reduce prices." Similarly, at a campaign event in January, Biden railed against corporations “ripping people off” through “price gouging, junk fees, greedflation, shrinkflation.”

Retailers may also be feeling the heat from everyday shoppers: “Most retailers are limited on how much more they can raise prices before there is pushback from the consumers,” Chadha says.

During an earnings call in February, Walmart CEO Doug McMillon outlined several areas where prices are coming down at the megastore.

“Our general merchandise prices are lower than a year ago and even two years ago in some categories,” McMillon said, referring to apparel, sporting goods and appliances. “In food, prices are lower than a year ago in places like eggs, apples and deli snacks.”

In January, Ingka Group, which operates the largest number of Ikea stores, said the cost of raw material for furniture has been falling, and that it plans on “passing on all the savings” onto customers throughout the first half of the year.

Last year, the home-decor store At Home announced a similar move in which it permanently cut prices due to lower supply costs.

On Thursday, Michaels said it was lowering prices on over 5,000 products across arts, crafts, DIY and home decor categories.

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Don’t expect pre-pandemic prices ‘anytime soon, if ever’

When it comes to essentials like groceries, across-the-board price cuts tend to be a little more complicated. Grocers often operate on razor-thin profit margins of as low as 1%, so when the production price of food goes up, grocers have to raise prices somewhere to compensate.

In some cases, if the grocer has enough buying power, it can negotiate with its suppliers to lower prices. That, in part, is driving prices down at Walmart. Given the vast array of products a typical Walmart sells, though, the store can simply lower prices in one area and raise them in another to balance out profit margins.

However, the supplier strategy is currently being put to the test at Whole Foods. At a summit of suppliers earlier this year, the Amazon-owned grocer told its vendors that it wants shelf prices to better match the declining prices of production, according to The Wall Street Journal. Whole Foods did not respond to a request for comment on how far prices have fallen, if at all, since then.

Despite some retailers cutting prices on certain categories of goods, the cost of most everyday items are not falling across the board, Chadha notes.

“Overall, I can’t think of any retailers that are lowering all their prices yet,” he says. “Prices are not returning to pre-pandemic levels anytime soon, if ever.”

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