Amazon, Walmart, and Target finally realize their colossal pricing mistake—now they’re slashing costs to win back customers

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Amazon Fresh just became the latest big-box retailer to cut costs on thousands of items, following in the footsteps of Walmart and Target in reversing course on years of inflation-induced price hikes in a bid to lure back disgruntled customers. 

The company’s Amazon Fresh subsidiary announced Thursday it will slash the costs of 4,000 weekly rotating grocery products by up to 30%. The discounts will apply to both national and Amazon’s store brands.

“Increasing our Weekly Deals across thousands of items and expanding the reach of Prime Savings at Amazon Fresh is just one way that we’re continuing to invest in competitive pricing and savings for all of our customers – both in-store and online,” Amazon Fresh worldwide vice president Claire Peters said in a statement.

Last week saw an onslaught of retailers offering discounts on essential items: Target made a similar promise as Amazon, saying it would cut the prices of 5,000 items including diapers and pet food. The retailer rolled out its “dealworthy” discount brand in February, introducing 400 household and essential products mostly under $10. Walmart also said it would lower costs of 7,000 items, a 45% increase in price rollbacks. Aldi and Kroger both made moves to lower grocery prices as well.

These price cuts come after persistent inflation raised the cost of groceries 1.1% year-over-year as of April. That’s down 0.1% from March and significantly less than the 4.1% year-over-year price increase for food from restaurants, leaving retailers with an opportunity to take advantage on consumer’s increased reliance on groceries. 

“We’re going to lead on price, and we’re going to manage our (profit) margins, and we’re going to be the Walmart that we’ve always been,” Walmart CEO Doug McMillon told analysts this month.

Retailers feel the pressure

Big-box stores lowering prices wasn’t an altruistic move to throw customers a bone during tough times. Retailers have suffered from weak sales due to customers’ struggle with high prices. Target reported a 3.1% drop in net sales from a year ago and a 3.7% quarterly dip in comparable sales, marking its fourth consecutive quarter of declines. Though Walmart has continued to soar, it owes much of its 6% revenue growth to its e-commerce successes and wealthy customer base, the latter of which makes up a growing chunk of its audience.

This trend has continued in fast food, with McDonald’s, Wendy’s, and Burger King all announcing meal deals following earnings reports that suggest customers are losing their taste for high-priced fast food, including $18 Big Mac meals and threats of surge pricing.

Moreover, retailers’ decision to hike prices in the first place can’t all be attributed to inflation, Lindsay Owens, executive director of economic policy group Groundwork Collaborative, argued. She told The Washington Post that companies actually increased their margins in times of increased operating costs. A March 2024 Federal Trade Commission report found retail revenue for food and beverages increased 7% above total costs in the first three quarters of 2023, indicating that grocery stores’ decision to raise prices wasn’t just a result of inflation, supply-chain disruptions, or the rising prices of commodities.

“What you see is that’s effectively made possible by companies who are passing along their rising costs in full but then going for more,” Owens said.

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