Consumers are feeling the pinch, US retail and catering industries are struggling! They are lowering prices and promoting sales one after another

U.S. retailers, restaurants, and other companies have been raising prices for years. However, now, American consumers suffering from inflation are starting to reduce spending, and some companies are trying to attract customers back by offering discounts.

According to media reports, from IKEA sofas to Jordan sneakers, sales companies of various products have indicated in recent weeks that many items this year have seen price reductions. Part of the reason is that with the rise in supply chain and labor costs, many companies rapidly increased prices over the past few years when customers were willing to pay higher fees.

However, now, with consumer demand decreasing for many non-essential items (such as home goods or expensive sneakers), companies selling these goods are forced to compete in smaller market shares.

Analysis shows that although inflation in the U.S. has eased this year, many consumers still feel heavily pressured by the higher prices of necessities such as food, insurance, and housing compared to pre-pandemic levels. In September, the inflation rate in the U.S. dropped to the lowest point in three years, but the slowdown was slower than economists had expected.

Reduced Consumption, Inventory Clearance: IKEA, Nike Lower Prices

"This year, global consumers have been affected by inflation, with everyone paying more for housing, food, and energy," said Jon Abrahamsson Ring, CEO of IKEA. To drive demand, IKEA has reduced product prices by about 10% globally in the current fiscal year, marking the largest annual price reduction in the company's history.

He mentioned that by the end of 2023, 12 franchisees operating most of IKEA's stores globally have agreed to collectively lower prices, a rare move for the furniture giant. "Many people have to spend more money on other things, so we must provide them with low-priced goods as much as possible," he said.

To offset the impact of rising costs, IKEA had raised prices overall in the past two years. The price cuts this year attracted more customers to the stores, but their spending decreased. On Thursday, the company announced a 5.3% decline in its annual sales.

Nike, on the other hand, lowered prices for different reasons: to clear inventory as sales were slower than expected. "The outlook for the remainder of this year will require us to launch more promotions," said Matthew Friend, the company's CFO, during an analyst conference call.

Data shows that Nike's latest quarter revenue dropped by 10%, with profits down 28% year-on-year, partly due to higher-than-expected promotional activities eroding profit margins. Nike executives warned that sales for this quarter could further decline by 10%.

Declining Foot Traffic: Restaurant Industry Also Offering Promotions

Meanwhile, the U.S. restaurant industry is also striving to stimulate demand through discounts after prices have been rising for several years.

According to data from market research firm Black Box Intelligence, same-store traffic at various types of restaurants in the U.S. has been declining this year, especially at restaurant chains. To attract customers back, these chains have introduced more discounts and promotional activities this year.

For example, Domino's Pizza announced on Thursday that its latest quarter saw a 1.6% price increase. With low-income consumers reducing spending on takeout, this chain is using more temporary promotions to stimulate purchases In September, Domino's launched a promotion where the price of a large pizza is the same as a medium pizza. This month, they reintroduced the "Emergency Pizza" buy one get one free promotion from last year.

Domino's CEO Russell Weiner stated during a conference call with analysts that major pizza delivery companies will continue to compete on prices this year. "We are currently in a pizza war," Weiner said.

Since the summer, other restaurant chains have also increased their promotional activities. McDonald's announced that they will extend the $5 combo meal promotion introduced in June until December, as the company aims to continue offering affordable prices.

Darden Restaurants announced in September that they will more prominently promote their low-priced menu, with their Olive Garden restaurant extending the "Never-Ending Pasta Bowl" promotion until November. Olive Garden plans to extend the duration of this promotion by about a month compared to last year