Should grocers make a big deal out of freezing prices?

Discussion
Sources: Lidl; Weis Markets
Aug 30, 2022

On Walmart’s second-quarter conference call, Doug McMillon, CEO, said the retailer’s merchants are focused on “holding prices down or rolling them back” across categories based on demand.

The categories tend to be opening price point, private brand, food and consumables, he noted.

“We want to help families put meals on the table with Great Value and our other private brands to relieve the pressure they’re feeling. The quality, value and convenience we offer make Walmart a smart choice, and we’re seeing more middle and higher-income shoppers choose us,” he said.

Like most other chains, Walmart is not publicly promoting its efforts to reduce or hold prices, outside of typical communications, but a few have.

In mid-May, Weis Markets unveiled a multi-million-dollar investment to cut prices on “hundreds of its best-selling frozen products.” Bob Gleeson, Weis’ SVP of merchandising and marketing, said in a statement, “Given recent increases in consumer costs, saving money is extremely important to our customers.”

Lidl in early June announced a campaign to temporarily drop prices on more than 100 items in all of its U.S. stores. Giant Eagle around the same time announced a special 20 percent discount on more than a thousand items for myPerks loyalty members.

Overseas, Australia’s Coles said last week it would lock in the price of more than 1,100 popular products until 2023 and lowered the prices on 500 more household essentials. Competitor Woolworths in June vowed not to raise prices on almost 200 “essential trolley items” until the end of the year.

In the U.K., Boots, Superdrug, Primark, Gousto and Weird Fish have all announced price-freeze schemes this year, while Asda and Morrisons reduced prices of essential items.

In France, French supermarket group Carrefour last week announced plans to freeze prices on about 100 “everyday essential” products, including food and non-food categories, for 100 days through November 30. The campaign joins other pricing pledges as part of an “anti-inflation challenge” launched in early June.

Carrefour said in a statement, “Household budgets continue to be hard-hit by inflation, and that’s why Carrefour is doing everything it can to protect its customers’ purchasing power.”

DISCUSSION QUESTIONS: Should retailers be doing more to publicize their efforts to selectively hold or reduce prices at this time? How effective are campaigns to temporarily reduce or freeze prices in driving incremental sales volume?

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17 Comments on "Should grocers make a big deal out of freezing prices?"


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Bob Amster
BrainTrust

Certainly, in-store signage should be employed to make this policy known to its customers. Digital, TV and radio advertising have been helpful in the past but, of those, digital is more effective with younger generations and TV and radio with the older.

Dr. Stephen Needel
BrainTrust

“It’s the economy, stupid” –James Carville. That was true in 1992 and true today. You should be doing anything you can do or say to cut prices – and shout it from the mountaintop. Just be aware that if you’re not the first to do so, then don’t bother – incremental sales will have flown the coop.

Michael La Kier
BrainTrust

Showing empathy for shoppers during economic downturns is a smart business practice. If the strategy does indeed attract more shoppers it can actually help the bottom line with incremental transactions or even basket size.

David Naumann
BrainTrust

If retailers can truly commit to freezing or lowering prices on essential items, this is worth publicizing in advertising, store signage or direct mail campaigns. Given that the cost of products fluctuate, I am not sure if freezing prices is a profitable strategy for grocers. It is a great deal for consumers, but it could negatively impact profitablity.

Rich Kizer
BrainTrust

If Walmart screamed they are lowering prices, there would be positive consumer reaction. BUT once a promise is made, it is hard to turn it off and dangerous to move prices back up months later. Lower prices now and don’t worry about a loud fanfare. The masses will spread the news of lower prices. Everyone is watching prices, it’s the hot topic today.

Ananda Chakravarty
BrainTrust

Consumers will appreciate that grocers are thinking about them, especially if price freezes are broadly applied and announced across most products in the store. It’s important for retailers to show they care. However the impact is highly dependent on the product and price elasticity. Inelastic products won’t see much of a change in volume regardless of price. Even elastic products won’t drive incremental volume during inflationary periods or when there is a drop in discretionary funds. The real impact is longer term, showing reciprocation of loyalty and a marketing message. The campaigns will drive customer retention.

Mohamed Amer, PhD
BrainTrust

Making a big deal out of holding down prices is a no-brainer if you can stick to it. Grocers need to identify the categories and products where they can do it and ensure they can keep prices down. Don’t underestimate the value of committing publicly and loudly to customers. If you subsequently decide to raise prices, the loss of credibility will destroy prior goodwill.

Gene Detroyer
BrainTrust

How effectively are campaigns temporarily reducing or freezing prices to drive incremental sales volume? It all depends on what the supermarket across the street does. If competition lowers or freezes prices as well, nobody gets incremental sales. They only experience margin reduction.

Shoppers know the costs of the goods they regularly buy, especially if the price increases. This short-term strategy will come back to bite you when the prices finally return to normal.

Gary Sankary
BrainTrust

It is a no-brainer, during inflationary times, for retailers to position themselves as price leaders in their segments. The “winners” will not only establish themselves as low-price leaders, but they will also deliver a value prop that includes product mix and customer experience. Chances are they have already been doing this well, and this period of price sensitivity will play to their strengths.

Patricia Vekich Waldron
Staff

While I’m not completely sure that consumers realize the complexity or impact of higher costs for grocers, I do agree that making a strong public statement about pricing strategies during a time of inflation is a smart move.

Shep Hyken
BrainTrust

Cutting prices and freezing prices are two different things. Rolling back prices to the pre-inflation days may get customers’ attention. Just go back to December 31, 2021 and you might get some customers excited about the promotion.

Richard J. George, Ph.D.
BrainTrust

This reminds me of the biblical quote about hiding a light under a bushel basket. In the Gospel of Matthew, Jesus says: “Nor do they light a lamp and then put it under a bushel basket; it is set on a lamp stand, where it gives light to all in the house.” Roll-back and frozen prices should be set on a lamp stand for all to see, not put under a bushel basket.

Gwen Morrison
BrainTrust

When retailers demonstrate they are on the side of their shoppers, they both help customers manage their wallet and make a positive impact for the broader community. There are well documented cases of Bim in Turkey and Biedronka in Poland committing to holding prices in the early 2000s when their respective economies went through periods of hyper-inflation. However, recent anti-trust charges waged against Biedronka illustrate the slippery slope when a retailer makes these pledges into a promotion. Billed as an ” anti-inflation” campaign, Polish shoppers were reportedly required to locate items at a lower price elsewhere and purchase them to get a reduced price from Biedronka. That’s not taking the side of shoppers.

Oliver Guy
BrainTrust

Interesting question and instantly reminded me of UK grocer, Asda’s promise that they were “always rolling back prices” — to which some cynical consumers responded — “If you are always rolling back prices why is nothing free yet?”

Empathising with consumers in the current climate should pay dividends therefore illustrating that you are on their side would be beneficial in terms of building brand loyalty.

Matt Krepsik
Guest

The idea of freezing prices is eye-catching, but it’s important that retailers think about the “why.” Losing a trip or having a customer switch to a deep discounter has larger and often longer-term consequences to growing and maintaining customer loyalty. Aside from lowering prices, retailers can prioritize engagement by providing personalized offers based on what customers buy and how they buy it. An offer specifically tailored to a consumer’s shopping habits that says “we are here to support you” is going to be more meaningful than a generic corporate message of “we’re lowering prices.”

Brian Numainville
BrainTrust

Absolutely. Our national research shows, not surprisingly, that one of the strategies food shoppers (43 percent) are adopting to combat inflation is to buy more items on sale. Programs like this make sales prices more predictable for shoppers and may draw them back to retailers using these types of initiatives.

Anil Patel
BrainTrust

Storytelling is the heart of marketing campaigns, and one of its most crucial components is “message.” So retailers must make sure they’re hitting the right chords with their messaging. I believe, that rightly promoting their price freezing efforts via marketing campaigns will deliver positive results.

Additionally, it is not unheard of for brands to offer discounts and deals in order to entice customers to buy. However, with ongoing challenges brought by inflation, it has become even more critical to retain the audience’s interest. The whole economy will suffer if consumers cease making purchases. Therefore, in order to prevent a possible recession, retailers must align their initiatives with the people’s needs.

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