- Inflation is holding steady at 3.7%, despite the Fed’s expectations that it will return to 2.0%.
- Walmart’s former CEO says retailers use old-fashioned techniques to hide the true value of discounts from consumers.
- Discount percentages don’t mean much if you don’t know the original price.
Inflation is on the rise again, forcing retailers to get creative.
The latest Consumer Price Index data was released on Thursday, showing that inflation was stable in September and prices were 3.7% higher than the same period in 2022. This was the same rate as in August, after falling to 3.2% in July.
That means prices are still rising faster than the Fed’s goal of returning inflation to 2.0%. Even as shoppers are hurting, it’s not always clear how hard this crisis is hitting their wallets.
One way could be with products marked with a discount mark. In a recent interview with CNBC, Bill Simon, former CEO of Walmart and current director of Hanes & Darden Restaurants, shows buyers how to tell when the discounts consumers expect are currently less important than they seem. I presented a simple sign for this.
“If you look at the Amazon or Walmart websites, there’s a lot of interesting things going on,” Simon told “Fast Money.” “They usually say things like, ’50-inch TV, $199.’ Now they say, ’50-inch TV, 40% off.’ And when you’re not really proud of your price point, We use percentages.”
In data analysis There’s an old saying in the world: “Most of nothing is still nothing.” The same logic applies here, as a percentage discount doesn’t mean a good deal if the original price has already gone up significantly.
Walmart page above This is a classic example of “good value” or “up to X%” statements intended to lure consumers into thinking they are getting a cheaper product without actually knowing the base price. will be broadcast.
Companies have also used other tricks to adapt to price increases without alienating customers. Some online stores use “dark patterns” to encourage customers to take actions they might not otherwise take, such as countdown clocks that encourage more impulse purchases. Brands also use “shrinkflation,” which reduces the volume of a product while maintaining price levels.
Shoppers are starting to feel anxious
Simon cited this strategy as an example of how consumers are starting to feel the pressure from multiple angles. Shoppers may be fooled by the trick at first, but eventually they’ll realize they’re still spending more money and back out.
In addition to inflation, Simon said the 2024 presidential election, global macroeconomic issues, geopolitical tensions, interest rates and student loan repayments are the latest factors that will make consumers “tired” of spending money. He pointed out that this is an example of the topic.
“That kind of buildup is draining and exhausting for consumers, even if it’s not as bad as it feels,” Simon says. “It’s a challenge, but overall I think for the first time in a while consumers have a reason to pause.”
Although spending has remained strong overall since the start of the year, there were signs that consumers have changed or are planning to change their spending habits and are spending less money.
People are spending less on cars, big-ticket items at Costco, and even trading in lower-priced groceries.
In other words, consumers are still unsure whether the U.S. economy will successfully avoid a recession, and even if it doesn’t look that way, inflation is still hitting their wallets hard.
You can watch the entire CNBC interview here.
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