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Walmart says shoppers are 'value hacking' to stretch their dollars

Dominick Reuter   

Walmart says shoppers are 'value hacking' to stretch their dollars
  • When shoppers buy store-brand pasta and premium sauce, Walmart says they're "value hacking."
  • The retail giant said consumers are using the strategy to save a few bucks on their grocery bills.

If you've ever tried to save a few bucks by picking the store-brand noodles to go with your nice jar of Rao's marinara, you're part of a current retail trend.

Walmart's head of investor relations, Stephanie Wissink, told analysts at TD Cowen that the retail giant was seeing more customers do exactly that.

Their term for this cost-cutting strategy: value hacking.

Specifically, they said the concept applies to mixing and matching premium and what retailers call "private label" products within the same meal.

Wissink even noted that more customers are adjusting their grocery runs to work around the timing of their paychecks.

Since Walmart derives over 60% of its product sales from the grocery category, the company is highly tuned in to how shopping behaviors are changing in the food aisles, especially after years of elevated inflation.

Even as price increases have begun to slow down or even reverse, the cost of many consumer packaged goods from national brands remains stubbornly high, a point that Costco CFO Richard Galanti underscored earlier this month.

By contrast, retailers like Costco and Walmart have been comparatively quick to pass along savings in their private-label offerings.

Where the normal price difference between, say, a block of Kraft cheese versus Walmart's Great Value might previously have been around 25%, Walmart told TD Cowen the savings has grown closer to 50%.

But rather than loading up their carts exclusively with these lower-priced options, shoppers are using some of those store-brand savings to offset the cost of fancier selections.

It's an approach that would be quite familiar to Costco members, where the company's Kirkland Signature products consistently meet or exceed the quality of the same item from a national brand while costing a fraction of the price.

A big part of Costco's appeal is finding a great deal on a premium brand product, like Wawona's frozen organic fruit blend, and pairing that with even bigger savings on Kirkland Signature oat milk for a delicious smoothie that doesn't break the bank.

For most businesses, falling prices pose several challenges, but juggernauts like Costco and Walmart say they're up for it, especially since shoppers spend some of their grocery bill savings elsewhere in the store.

"If the food prices come down," Walmart CEO Doug McMillon said in November, "that'll free up dollars to be spent in general merchandise."

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