Despite price stabilization, Walmart, Chipotle, and other companies face customer skepticism and pressure.

• Despite the decrease in inflation, customers remain dissatisfied with the increase in prices and consider inflation to be a significant issue.
• Several companies, including Walmart, Chipotle, and Wendy's, have faced customer backlash on social media.
• In response to consumers' price sensitivity, Target, Aldi, and McDonald's have advertised price reductions and value meal options.

The discounter announced earlier this summer that it would implement digital shelf labels in more stores, thereby reducing a tedious task from store workers' to-do lists.

Some TikTok users criticized the higher-tech price tags as a potential step towards the retailer implementing dynamic pricing, similar to Uber's surge pricing.

The company won't use dynamic pricing technology at present or in the future, as stated by a Walmart spokesperson.

The retail giant has joined the growing list of companies facing consumers' frustration over high prices and concern that prices will continue to rise. Sales have fallen for many retailers, restaurants, and other consumer companies as shoppers reduce their spending. In response, businesses are now offering discounts, promotions, and value meals to attract customers.

Jean-Pierre Dubé, a professor of marketing at the University of Chicago Booth School of Business, stated that consumers are disillusioned with misleading pricing practices. They have experienced additional fees for smaller items, felt pressured to tip workers for services they did not tip for previously, and are tired of being deceived.

"We're reaching a boiling point on this," he said.

The grocery companies contend that consumer perception is distorted, despite grocery prices increasing by only 1% in the past year, which is now at pre-pandemic levels. Additionally, consumers' purchasing power has improved due to inflation decreasing and a robust job market, resulting in an increase in the average private-sector worker's real hourly earnings, as per U.S. Bureau of Labor Statistics data.

Rising electricity and rent expenses are among the other key costs that have increased Americans' expenses over the past year.

"According to David Chavern, president of the Consumer Brands Association, people frequently remember the cost of consumer products they buy, but the grocery and drug store prices have not significantly increased over the past 12 to 18 months."

A Pew Research Center survey from May found that 62% of U.S. adults consider inflation a "very big problem in the country today," which is more than any other issue they were asked about, including illegal immigration, gun violence, violent crime, and the federal budget deficit.

Despite inflation decreasing, the percentage of Americans who consider it a significant issue has remained relatively stable. In a recent Pew survey, 65% of respondents reported that inflation was a major concern.

The topic of inflation has gained prominence in the presidential campaign discussions. Trump has accused Biden of being responsible for inflation, while Biden has accused companies of being greedy.

Shrinkflation in the spotlight

Despite grocery inflation possibly returning to pre-pandemic levels, Americans' frustration remains due to the significant increase in prices compared to years ago.

On Thursday, the federal government will release the consumer price index for June, which will be viewed by consumers, businesses, and the Federal Reserve.

Dianna Campbell, a 69-year-old TV producer and consultant in Manhattan, stated that she has observed prices remaining high for various items, including laundry detergent and restaurant meals.

She stated that despite the higher cost, she was receiving less and the quality was declining.

Not just Campbell, many consumers are also upset about shrinkflation, which involves reducing an item's size while keeping its price the same.

In the past year, the term "shrinkflation" has gained popularity through its use in pop culture and politics. In March, both the Cookie Monster and Biden mentioned shrinkflation, with the former complaining about the reduction of his favorite treats and the latter criticizing the decrease in Snickers bars. However, Mars, the parent company of Snickers, denied any skimping on the chocolate bars.

Customers have seen plenty of other examples on trips to the grocery store.

Gatorade was criticized by Sen. Bob Casey, D-Pa., for replacing a 32-ounce bottle with a 28-ounce version while maintaining the same price in a report on shrinkflation.

Gatorade maintains that its decision to widen the distribution of its 28-ounce bottle was part of its long-term strategy, not a response to the current economic climate, as stated by spokesperson Andrea Foote in an interview with CNBC.

Walmart has been accused of shrinking the size of its Great Value paper towel rolls, cutting the number of sheets from 168 to 120, but not reducing the price. However, Walmart spokeswoman Tricia Moriarty claims that this is not shrinkflation, as the company reformulated the product to make each sheet more absorbent.

Recent backlash against a restaurant was triggered by customers' awareness of shrinking portions. After some customers noticed their burrito bowls were smaller, they began filming the workers making their orders and posting the videos on TikTok.

In a May interview with Jim Cramer on CNBC's "Mad Money," Chipotle CEO Brian Niccol stated that the company has not altered portion sizes and characterized the TikTok craze of filming employees as "impolite."

"The whole thing is quite bizarre to me," he remarked. "Our goal has always been to provide people with large portions. We aim to give them what they desire."

Zachary Fadem, a Wells Fargo analyst, tested the theory by ordering 75 burrito bowls from eight New York City Chipotle restaurants and weighing them. The weight of the burrito bowls varied based on location, leading the analyst to conclude that consistency was the issue, not shrinkflation.

The sensation of overpaying and receiving less is not exclusive to consumers' perceptions. It is a widespread experience when individuals purchase groceries for backyard barbecues.

On average, customers spent $71.22 on a cookout for 10 people on July 4th, which is a 5% increase from the previous year and a 30% increase from 2019, according to the American Farm Bureau Federation.

Pricing pushback

Consumers have expressed outrage towards Walmart for allegedly cheating them.

In late February, Wendy's had to backtrack after CEO Kirk Tanner announced that the burger chain would test features such as "dynamic pricing" in 2025, which would involve adjusting menu prices to drive demand during slower times of the day. However, Wendy's later clarified that it had no plans to raise prices when demand is highest and blamed misleading media reports for the uproar.

In recent times, Walmart has faced criticism from social media users regarding its implementation of technology that enables it to swiftly adjust prices. The retailer aims to have digital shelf labels in approximately half of its U.S. stores, which amounts to 2,300 locations, by 2026.

Cristina Rodrigues, a Walmart spokeswoman, stated that digital shelf labels are intended to save time. These labels feature LED lights that blink to direct store workers in their tasks, such as restocking items or locating products for a customer's online order. By replacing traditional paper tags, these labels eliminate the need for manual labor.

Walmart has no plans to alter the frequency or adopt new pricing strategies, according to Rodrigues. All price adjustments will still require approval from the merchandising team. Rodrigues explained that a store employee must stand in front of the shelf and use a mobile app to increase or decrease the price with the technology.

The pushback from shoppers is due to years of feeling overcharged for price increases, according to Dubé of University of Chicago.

"The presumption is that this is just another attempt to cheat them over."

If restaurants and retailers adopt dynamic pricing, it can have both positive and negative effects on prices, according to him. In Europe, some grocery stores reduce food waste by cutting prices on baked goods and perishable items towards the end of the day, he said. Similarly, if Wendy's lowers prices during slower times, customers could benefit from cheaper meals, he added.

More price cuts, value meals

Lower prices are on the horizon for consumers, and they won't have to wait long.

In an effort to attract customers, some retailers and restaurants have increased their value offerings, such as Aldi, which has recently introduced new deals and price cuts.

In the first quarter of the year, Walmart lowered prices on nearly 7,000 food items. Whole Foods reduced prices on about 25% of its items, including nearly 900 of its private label items, over the last six months. Additionally, fast-food chains such as McDonald's, Starbucks, and Burger King have recently introduced new value meals to boost sales.

As their sales decline and investors worry, consumer packaged goods companies are now shifting their strategies. During the pandemic, companies like stopped advertising to keep up with demand and manage supply chain disruptions.

Mondelez, the snacking company that owns Oreos and Clif bars, is planning promotions for its U.S. business, as low-income consumers buy its cookies and crackers less frequently. The company expects a challenging year and has cut prices on some of its larger pack sizes from about $4 to below $4.

Luca Zaramella, the CFO of Mondelez, stated at the Evercore ISI Consumer & Retail Conference last month that the top priority is to continue growing the company and delivering volume growth.

Kroger has observed the same trend as well, given that it stocks numerous of those items.

According to Kroger CEO Rodney McMullen, during a mid-June earnings call, brands are increasing their own spending to provide discounts to customers and boost sales volume. He stated that the current level of promotions is comparable to pre-pandemic.

Whether companies can suppress consumer anger as promotions and discounts become more prevalent is yet to be determined.