It sounds like everything will be on sale this summer if you believe what big American stores have been telling guests: Some stores are having sales on 5,000 items at Target (TGT, -1.51%), 7,000 items at Walmart (WMT, +0.09%), and 4,000 items at Amazon Fresh (AMZN, +2.05%). People may need sales like these to get some relief from the effects of inflation, but they might not actually save money because of a common buying habit: buying things on the spur of the moment.
Sally Lyons Wyatt, chief adviser of consumer goods and food service insights at consumer analytics company Circana, said that these sales are not likely to make people spend less money at the grocery store.
“When people go into these stores that say they’ve lowered their prices, they’re more likely to buy one or more things they didn’t buy before,” Lyons Wyatt told MarketWatch.
To put it another way, the “summer of savings” might turn out to be the summer of spending.
Retailers have known for a long time that impulse purchases are a key part of their business. According to Target CEO Brian Cornell, the company is “providing inspiration and easy access at our stores, with no barriers between impulse and purchase.” This was said in March. Some stores say that getting customers to buy things on the spot is a way to help them “discover” new products.
Some of the new discounts stores are offering could be “loss leaders,” which is a way to price items to attract customers by selling them at low, unprofitable prices while also enticing them to buy other, more expensive items. The goal is to increase sales by lowering prices.
In other words, the so-called summer of savings could end up being a summer of spending.
Lyons Wyatt said that middle- to high-income shoppers who have cut back on eating out and are more likely to buy expensive groceries that aren’t on sale but are still cheaper than going to a restaurant are an important group for stores right now.
However, even shoppers with average or low incomes buy expensive foods on a whim. “Because they want to be able to splurge a little, and it’s easier to splurge on food and drink than it is to go buy high-end clothing or electronics,” she explained.
Food costs went up by 25% from 2019 to 2023, and some Americans are using credit cards to pay for their food. In January, the Pew Research Centre polled people and found that the cost of food and other consumer goods was more of a worry for them than the cost of housing.
“You need to be able to have fun”
A new report from Morning Consult says that people are looking for ways to save money on groceries right now. Eighty percent of those surveyed say they compare prices and choose generic brands over name brands.
There are changes happening in shopping habits this summer as people try to get better deals. All stores are looking for new ways to bring in new customers. For example, people with low incomes buy food at dollar stores because the prices are lower. Lyons Wyatt said that even though the sizes of the items are smaller, they can still get a better deal than at a regular grocery store.
She said, “It’s interesting to watch because nothing is winning.” People are moving from casual to fast-casual restaurants, from going out to eat to cooking at home, and from regular grocery stores to discount stores.
CEO of Ipsos and vice president for retail and restaurant research Wendy Wallner said that some stores are going even further by promoting their own store brands, which have become popular alternatives. According to McKinsey & Company, so-called “private-label” products not only help customers save money, but they also make stores more money than national brands.
Private-label goods that are cheap can cash in on trends. In late April, Walmart launched a new store brand called bettergoods that is “trend-forward and chef-inspired.” A lot of the things there are snacks like pistachio nut butter and guacamole-flavored tortilla chips that cost less than $5.
Also, at the end of May, Target added “trending summer flavours,” such as dill-pickle trail mix, to its private label Favourite Day and Good & Gather snacks. A lot of the snacks from these two brands cost less than $5 as well.
The man said, “It doesn’t matter who you are or how much money you make.” “You need to be thrilled. You need to have fun. That’s what people of every income level want.
One-third of people who answered an Ipsos poll in 2022 said they had bought food or drinks on the spot in the past week. However, they also said they did that less often than they used to because of inflation. 61% of these shoppers said they had bought something they hadn’t planned to in a store, and 24% said they had done the same thing online.
People said they bought something they hadn’t planned to because “the price was too good to pass up” and “I wanted to treat myself.” Ipsos discovered that people are least likely to buy something on the spur of the moment “in the morning, when they are thinking more deliberately, and most likely to do so in the evening, when they are starting to feel cognitive fatigue.”
Wallner said that the average shopper goes to four stores to get their groceries. People who are tight on money are being more careful about making impulsive purchases in 2024 than in previous years. Grocers are trying to get people to make more necessary purchases in their stores instead of shopping at the three other stores they usually do, she said. She said that stores are using these sales to “draw more share.”
“Really about where you are going to buy your core grocery items that you always buy,” says this year’s summer deals. That is what they are fighting about right now, Wallner said. In big-box stores that sell more than just food, she said, people are more likely to buy things on the spot in sections other than groceries. “So as you walk through it, you think, ‘Oh, I might as well buy some clothes.'”
How to stay on budget and save money on food
- Bring cash with you when you shop. You can spend more than you planned when you use a credit card or even a debit card. One good way to keep your grocery bill low is to pay with cash.
- Buy store brands. This summer, stores will try to get people to buy their own brands so they can make the trade. Consumer Reports says that private-label versions of the same type of product can be 20% to 25% cheaper than national brand versions.
- Make a plan for your meals and shop less often. Plan your trip so that you can get everything you need in one go. NerdWallet says that cutting down on the number of trips you take will make it less likely that you’ll buy something you hadn’t planned to.
