As household budgets tighten, retailers are searching for the price point that will persuade cautious shoppers to open their wallets.
With Americans still feeling the strain from elevated gas and grocery prices, many consumers are cutting back on impulse buys or hunting harder for the best value.
That shift is pushing major names, including toy maker Hasbro and arts-and-crafts chain Michaels, to focus on products priced below $10 in hopes of keeping budget-conscious customers coming through the doors.
‘$9.99 is a real price point that drives a lot of consumer behavior,’ Hasbro CEO Chris Cocks told the Daily Mail in a statement.
‘It is a “snackable” level of investment – great for a quick treat, a gift, or a little show of love or appreciation, and popular for gifts.’
Alex Hennick, president of Hennick & Associates, a company that purchases surplus inventory from businesses, told the Daily Mail that retailers are putting more emphasis on lower-cost products as shoppers become more selective with their spending and work with ‘limited dollars to spend.’
‘People are experiencing high costs, high interest rates, high grocery, high cost of living, and it’s hard,’ he said. ‘Customers nowadays are very limited because of the economy.’
The result is a more deliberate kind of shopping trip. Consumers are spending extra time comparing options in the aisles, Hennick said, and brand loyalty is fading as lower-priced alternatives become more appealing at checkout.
Experts are finding that $9.99 is the sweet spot to get consumers to open their wallets
This has forced companies, like Hasbro, to rethink their products, even if hitting a consumer-happy price point causes profit loss.
Harbro recently released a World Cup Uno set that comes directly in the storage tin. There’s no outer packaging. Its Connect 4 game now comes in a sleeve instead of a box as well. The modifications keep games at a reasonable price point so shoppers keep purchasing the products.
‘We invest a lot of time with our designers and production partners to pack as much value as we can in the price band given its importance,’ Cocks told the Daily Mail.
‘Fortunately, we have a fair amount of operating room,’ he continued. ‘For toys, in particular, packaging can consume a lot of the cost of goods, so a lot of focus, especially when cost inputs are rising, is where we can make smarter tradeoffs in the packaging to either keep the price low and/or push more value in the product.’
Michaels, meanwhile, currently has more than 8,000 art supply products listed under under $10, including a 16-pack of multicolored paint, various sizes of canvases, and wall art, among other items.
The popular craft store also has more than 16,000 fabrics listed online that sell for less than $10 a yard, including patterned ones, like stars, daisies, and gingham, for anywhere between $1.99 and $3.99.
And for parents whose children are obsessed with the new Toy Story movie, they can even pick up the Disney-themed fabric for $5.99 a yard.
And fans of Michaels will begin to see even more products below the $10 price point, as the company plans on expanding that price threshold by 10 percent by the end of the year, Chief Merchandising Officer Stacey Shively told The Wall Street Journal.
‘$9.99 is a real price point that drives a lot of consumer behavior,’ Hasbro CEO Chris Cocks told the Daily Mail in a statement. ‘It is a “snackable” level of investment’
Some companies, like Hasbro, had to rethink their product packaging, like its World Cup Monopoly, which comes in a tin storage container with no outer package shell. This was done to keep the game within the lower price point
She told the outlet it allows customers to still have fun with their shopping while staying within budget.
Hennick told the Daily Mail that customers seeing a $9.99 price feel like it’s less than a $10 or $10.99 price, despite only being a single cent or dollar less.
‘It seems a lot less. $19.99 seems a lot less than $20, even though it’s not,’ he said. ‘A lot of these brands are focused on trying to maximize, but also get to a point where they are affordable for the masses.’
‘It doesn’t matter whether that’s skincare, toys, clothing, or pretty much any category, but I think more and more people are going towards that cheaper price point for things that they know are the same.’
Andrew Harrison-Chinn, the CMO of Dragonpass, a travel benefits company, agrees, telling the Daily Mail: ‘Consumers naturally create spending thresholds in their heads, and staying below them makes a purchase feel easier to justify.
‘Crossing into double digits, even by a small amount, can make people pause and question whether they really need it.’
And much like customers in a dollar store, who end up buying more than they thought they would due to the price point, Hennick said shoppers will end up buying more because of this retail trend.
‘Once you’re in the environment, you’re going to spend, whether you have the money or not,’ he told the Daily Mail. ‘You’re going to put it on credit. You’re going to do whatever you have to do. I think people are buying a lot more because it’s the deal.’
Other stores, like Michaels, are expanding their collection of products priced below $10 to draw customers in. Michaels has thousands of items, including paint and crafts, priced below $10
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It also has thousands of fabric patterns that are priced below $10 per yard
Ward Kampf, president of Northwood Retail, told the Daily Mail: ‘$10 now feels like the new $1 and $5 mark. People are always seeking value, wealthy or not, and we’re undergoing a recalibration.’
Lucas Coro, the director of vendor sales at Digistore24 USA, told the Daily Mail that prices ending in 99 or 97 tend to drive better sales.
‘A lower-priced product can get customers through the door, and once they’re shopping, there’s a greater chance they’ll buy additional items,’ he said.
Consumers are also more worried about being cost-effective than receiving the same quantity.
Alcohol brand, Twisted Tea, recently came out with a four-pack to satisfy its customers’ wants.
Despite offering less cans for the same price point, customers are happy to continue to pick it up for a cheaper amount.
‘More and more brands are doing a smaller bag of potato chips, or a smaller bag of a box of something at a similar price point in order to save any way they can,’ Hennick told the Daily Mail.
‘They don’t necessarily realize the difference.’
And for the ones that do notice: ‘Not a lot of customers realize the changes in the economy, or the fact that a war might cause gas prices to go up, which might cause manufacturing prices to go up, so the price increases are going to have to go somewhere,’ Hennick said.
There’s an emphasis on smaller priced items, as Americans ‘have limited dollars to spend,’ Alex Hennick, the president of Hennick & Associates, said. Lucas Coro, the director of vendor sales at Digistore24 USA, said that prices ending in 99 or 97 tend to drive better sales
Ward Kampf, the president of Northwood Retail, said $10 is the new $5 and people are seeking value in their purchases. Andrew Harrison-Chinn, the CMO of Dragonpass, a travel benefits company told the Daily Mail: ‘Consumers naturally create spending thresholds in their heads’
Others are using the tactic to gain new customers by underpricing their competitors.
Clean Cult keeps some of its prices at a low price of $7.99 to encourage consumers to pick their product, rather than bigger brands.
It is also runs frequent sales on detergent to shave off $3 from the $12.99 price point, putting it in at a perfect sweet point that doubles their sales, it told WSJ.
However, consumers may start to see some prices starting to lower, as the Bureau of Labor Statistics (BLS) reported that consumer prices fell by 0.4 percent in June, cutting the annual CPI inflation rate up to 3.5 percent for the month, its lowest level since April – and down from the 4.2 percent figure in May.
The fragile ceasefire in the Middle East may be over now, but last month it helped put oil prices back where they were in February, before the fighting began.
June data reflected the improvement, with energy prices down 5.7 percent from May and gasoline prices down nearly 10 percent month over month – AAA reported that average US gas prices were down to $3.86, getting close to pre-war levels.
‘Today’s CPI number looks like good news on the surface, with inflation finally easing after a tough few months, but don’t celebrate too soon,’ Nic Puckrin, markets expert and former Goldman Sachs analyst, told the Daily Mail.
Lucas Coro, the director of vendor sales at Digistore24 USA, told the Daily Mail that prices ending in 99 or 97 tend to drive better sales
The headlines underscore Puckrin’s warning, as the US and Iran have already jump-started their conflict in the Strait of Hormuz again earlier this week, causing global oil prices to jump 15 percent this week alone.
While a dip in gasoline prices offers visible relief at the pump, that doesn’t mean inflation will quickly follow.
In fact, economists say that sticky, higher inflation might be here for a while – that’s when consumers and companies get used to rising prices, which tends to keep them rising.
The Daily Mail has reached out to Twisted Tea and Michaels for comment.
