Why Target, Aldi, Walmart and others are really lowering prices for supermarket staples

Remember Target – which reported another drop in sales this morning – and other supermarkets cutting grocery prices just to help you? Think again.

Target said Monday it is cutting prices on 5,000 everyday products, from milk to diapers, as the big-box retailer looks to win over Walmart customers.

Earlier this month, supermarket Aldi said it was cutting prices on more than 250 items. Walmart has used its “rollback” promise to lower prices this year and, like Kroger, has invested in improving its own assortment.

“We know consumers feel pressured to make the most of their budgets,” said Rick Gomez, Target’s chief food officer, giving the impression that the company was just helping customers. It echoed what the Aldi boss had said.

But the real reason simply has to do with business. As some grocery costs finally start to fall after two years of punishing price increases, supermarkets that are slow to pass them on will quickly lose customers.

That’s exactly what’s happening with Target. It announced this morning that sales for the first three months of 2024 are lower than last year – the worst year in seven months.

Target announced this week that it is cutting prices on 5,000 items

Price reduction signs in Target

Price reduction signs in Target

Retail experts point out how price sensitive American shoppers are, especially as budgets are stretched to the limit.

That’s exactly why Target went to town unveiling its barrage of 5,000 price cuts — which it timed to make headlines on a quiet Monday morning.

Target’s sales fell last year for the first time in seven years.

This morning – Wednesday, May 21 – it recorded another drop in sales for the first quarter of this year, after higher prices depressed consumer spending.

Target has been referring customers to its major rival Walmart, which last week boasted that it had increased sales by four percent – a rare feat in recent retailer earnings.

It saw a jump in sales – and predicted the rest of 2024 would be great too – after leading the way in price cuts, retail experts said.

Walmart has talked about being cheaper than the competition and having “widened the gap” on pricing.

Assistant Professor of Economics at the University of Wisconsin Andrew Stevens told local station WSAW-TV that lowering prices is often used as a marketing tool to get ahead of the competition.

“Consumers certainly notice it when prices go up somewhere, and usually don’t notice it when prices go down somewhere,” he says.

“So I think what we’re seeing is Target trying to grab attention and draw consumers into their store and away from some of their competitors.”

Walmart said last week that like-for-like sales rose nearly 4 percent in the first three months of the year.

CEO Doug McMillon talked about how competitive pricing across its 4,600 stores had attracted new customers.

“We have customers who are coming to us more often than before and newer customers that we haven’t had traditionally,” Walmart Chief Financial Officer John David Rainey told CNBC.

He said the company has increased “rollbacks,” which are price reductions on specific items that the company highlights with signage in stores or on its website.

As earnings season begins to wind down, Target reports its quarterly results on Wednesday and appears to be betting on price cuts that will contribute to a positive outlook for the future.

Budget supermarket chain Aldi is also lowering prices

Budget supermarket chain Aldi is also lowering prices

Aldi is known for selling various imitation products at significantly lower prices.  In the photo, Pringles on the left and the Aldi imitation product on the right

Aldi is known for selling various imitation products at significantly lower prices. In the photo, Pringles on the left and the Aldi imitation product on the right

On Monday, the company said the discounts will be spread across dozens of national brands as well as Target’s own brands, adding that these latest discounts are in addition to the price cuts it had already planned for Memorial Day weekend.

One pizza brand is down by 20 cents and bagels by 40 cents.

Other staple foods, including meats, breads, fresh fruits and vegetables, are offered at a discount during Memorial Day weekend. Soda, various snacks and yogurt will also drop in price, Target said.

In the meantime, Aldi said it would pass on $100 million of savings through Labor Day by further reducing everyday low prices on more than 250 items.

“Aldi is always looking for ways to help customers save money, but with more and more experts warning of continued inflation, the time was right to offer even bigger discounts on our already low prices for the second year in a row,” says Dave Rinaldo, president at Aldi USA.

Walmart debuted a private label food line of 300 items on April 30, 70 percent of which were priced under $5.

Meanwhile, Kroger said in March 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.