In a game of chicken between stores and shoppers over prices, stores appear to be blinking first, CNN reports. Several retailers, including Walmart, Ikea, H&M and Michaels, have cut prices in an effort to pull consumers into stores and spend money on such things as new clothes, decorative items for the home and arts and crafts or hobby kits, according to the network.
Shoppers have pulled back for a year now as costs have risen 20% to 30% higher than they were three years ago and as incomes failed to keep up, Sarah Wyeth, Managing Director, Retail and Consumer with S&P Global Ratings, told CNN.
This is making consumers across income levels look for deals.
“The ‘budget conscious consumer’ is no longer just low- or middle-income earners. By far the starkest decrease in intent to spend is coming from the higher-income groups, and those that were previously the most immune to an economic downturn are now tightening their belts,” said Chad Lusk, managing director in global consultancy firm Alvarez & Marshal’s consumer and retail group. “Retailers should be thinking about targeted deals on higher-priced discretionary merchandise, too, to increase buying frequency.”
The result has been a sense of anxiety by the industry. “Retailers have been nervous for quite a while,” Wyeth said. “There’s just less dollars for consumers to spend.”
The challenge for retailers now is to shake consumers out of that frugal mindset.
Click here for more from the CNN report.