Conventional wisdom says that prices generally don’t go down after inflation pushes them up. But a handful of retailers have bucked the trend, and Michaels is the latest retailer to announce broad price reductions.
In mid-April, the arts and crafts chain said it lowered the cost of more than 5,000 items, with discounts ranging from 15% on frequently bought items such as paint, markers, and pens to 35% for canvases and 40% for T-shirts.
John Gehre, chief merchandising officer at Michaels, told Retail Brew that customers will see “constant rollbacks…over the next six months to a year.” He also stressed that the cuts were not part of a limited promotional cycle, but rather a lasting strategic shift.
“This is more of a permanent approach,” he said. “When I think about a promotional cycle, I think of an event, a week, two weeks, three weeks, something along those lines. This is a more long-term strategy we want to put in place.”
Joining the deflators
While inflation is still rising above 3% across the economy, the chain isn’t alone in deflating the cost of some items.
- In its most recent earnings call in February, Walmart CEO Doug McMillon said general merchandise prices were below where they were a year ago, and that prices on some food staples such as eggs and apples were lower as well.
- In addition, in late 2023, Ikea announced its “New Lower Price” initiative, promising to cut prices up to 20% on 600 items.
But deep discounts at a handful of retailers do not equal sustained deflation. As Coca-Cola CEO James Quincey told CNBC’sSquawk on the Street earlier this year, “If one looks at inflation over time, we very rarely get into periods of sustained deflation. That’s just not a consumer effect.”
For Michaels, Gehre said, “the real trick” to making price cuts work long-term comes down to whether they significantly boost demand in the process.
“We think it’s the right thing to do, and we think it’s another tool that we can use to kind of drive traffic into our stores and drive loyalty,” he said.
This report was initially published by Retail Brew.