In a bold move, several companies have chosen to lower prices despite the looming economic challenges of rising inflation and potential tariffs. A recent survey conducted by Mintel revealed that over 65% of adults consider price as the most crucial factor when choosing where to shop. This consumer behavior has prompted companies like Lalo, Bobbie, and Blue Apron to strategically adjust their pricing to maintain and potentially expand their customer base.
The trade tensions initiated by President Donald Trump with China, Canada, and Mexico could result in American families incurring an additional $1,200 in annual expenses, as reported by the Peterson Institute. Amidst these challenges, Lalo, a company specializing in baby and toddler products, has reduced its prices for the first time in its 12-year history. The company slashed prices by up to 40% on 90% of its offerings after investing in an American facility and renegotiating its supply chain agreements.
“We invested in an American facility, and after about 18 months… we were able to lower our prices. Essentially, it’s cheaper for us to do it ourselves,” – Laura Modi
Lalo's decision comes at a time when consumer confidence experienced its sharpest decline since August 2021, largely due to inflation worries, according to the Conference Board. Inflation spiked last month to its highest since June, exceeding 3%, while retail sales dropped by 0.9% in January from the previous month, as per the Commerce Department.
Bobbie, another prominent player in the baby product market, lowered its prices by 15% on most of its formulas in December. Meanwhile, Blue Apron announced a price freeze for both existing and new customers starting January, alongside reducing shipping costs by a dollar.
“We froze prices for current and new customers for the next six months, starting in January. It also reduced shipping costs by a dollar to $9.99,” – John Adler
For Lalo, specific products have seen significant price reductions. A high chair that previously cost $235 now sells for $195, while a bib priced at $29.50 is available for $16.99. Michael Wieder of Lalo emphasized the strategic nature of these decisions.
“The bet was that it was going to be good for business, but it started with a bet on our customers. When you can do price reduction, you can accelerate velocity of growth,” – Michael Wieder
Despite potential impacts from a proposed 10% tariff on Chinese goods, Lalo's juvenile products remain exempt from these tariffs under Trump's initial term policies. Nevertheless, Adler from Lalo highlighted their preparedness.
“While there is this uncertainty around tariffs and even labor supply, we are well insulated simply by virtue of where we are planning our product and how we’re setting up our supply chain,” – Adler
“It’s also something that we can afford to do because we believe in the relationship that we’re building with people, letting them know that we’re actually thinking about them when we make these business decisions,” – John Adler
The actions taken by these companies reflect a broader trend where more than 50% of adults indicate that their perception of a company's actions and values is as crucial as the product price, according to Mintel. Diana Smith of Mintel underscores the importance of strategic pricing adjustments.
“Brands really need to make sure that the lower prices are well thought out and part of a longer-term strategy, rather than just a really quick hit, because that can obviously devalue brand perception if later on they find themselves in a situation where they have to revert,” – Smith
“There’s never a bad time to lower the price, especially when consumers have been incredibly price sensitive, and will continue to be. I think we’re going to see more brands move along these lines,” – Diana Smith
Walmart's forecast of slower sales growth further illustrates the challenging retail landscape. Companies must navigate economic uncertainties diligently while meeting consumer expectations and maintaining brand integrity.