Retailers Hope $5 Products Will Entice Weary Consumers

With American shoppers feeling pinched, retailers hope $5 goods will help drive traffic.

Target is the latest store to embrace this movement, Reuters reported Tuesday (Feb. 28), after the retailer said during an earnings call that it would begin carrying more of its own private label products priced under $10 to entice inflation-conscious shoppers.

CFRA Research analyst Arun Sundaram told Reuters Target’s move to reduce prices could bring more shoppers to its stores.

“It is nice to see Target invest in its own brands and use that as a way to keep differentiating themselves against Walmart and Kroger,” he said.

On its earnings call Tuesday, Target Chief Growth Officer Christina Hennington said the company had seen higher sales of $3 ornaments, $5 candles and $10 throw pillows.

As PYMNTS reported this week, Target also noted during that call that it had benefited from rising consumer demand for both private label products and comfort eating, as found in the retailer’s Favorite Day line.

“Our Favorite Day brand that we’ve launched over the last couple of years, which is a sweets brand, has seen explosive growth over the last year or two,” Hennington said.

“This is a place where we’ve taken the liberty to innovate in basic categories, whether it’s cookies or ice cream … and the flavor profiles, the way that they brought the items to market have really shown that the guests will engage across the board if we give them a reason.”

Private label products have grown in popularity as consumers seek out lower-priced options to offset the effect of high inflation. Brands and retailers that include Colgate-Palmolive and Coca-Cola and Albertstons and Walmart have all noted this trend in recent months.

Walmart  has been pushing its private-label goods to consumers while trying to combat ongoing price increase attempts by suppliers.

This trend is happening as Americans are paying more for groceries. Figures from the U.S. Bureau of Labor Statistics (BLS) show that grocery prices rose 11.3% year over year in January.

And consumers feel the impact of this inflation even more acutely, per data from PYMNTS’ study “Consumer Inflation Sentiment: Perception Is Reality,” which finds that consumers estimate grocery price increases to be more than double the BLS-measured rates.

The report, drawing from a survey of more than 2,100 U.S. consumers in December, showed that 69% of consumers made changes to their grocery shopping lists in the last year in response to price increases. Nearly 60% percent of consumers said they have reduced the quantities of items they are purchasing, while 35% have reduced the quality.

For all PYMNTS retail coverage, subscribe to the daily Retail Newsletter.