Retailers are increasingly focusing on products priced under $10 in an effort to attract consumers who are becoming more deliberate with their spending due to economic pressures such as high inflation and rising costs of living. This strategic pricing aims to capture shopper attention and encourage purchases, even as consumers scrutinize their budgets.
Experts note that the $9.99 price point, in particular, is highly effective at driving consumer behavior. Hasbro CEO Chris Cocks described it as a "snackable" investment, suitable for small treats or gifts. "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," Cocks stated.
Alex Hennick, president of Hennick & Associates, which sources excess products, highlighted that consumers have "limited dollars to spend" and are more discretionary. This economic climate leads consumers to spend more time browsing and to be more open to trying new brands if the price is right. "People are experiencing high costs, high interest rates, high grocery, high cost of living, and it's hard," Hennick said. "Customers nowadays are very limited because of the economy."
Companies are adapting by rethinking product presentation and packaging to maintain lower price points. Hasbro, for example, has adjusted the packaging for some of its games. The World Cup Uno set now comes directly in its storage tin without outer packaging, and the Connect 4 game is sold in a sleeve instead of a box. These modifications help keep the retail price lower, even as input costs rise. "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 explained. Michaels, an arts and crafts retailer, has also expanded its offerings under the $10 mark. The company currently lists over 8,000 art supply products below $10, including paints and canvases. Additionally, it offers more than 16,000 fabrics priced at less than $10 per yard, with some specialty fabrics like Disney-themed material selling for $5.99 a yard. Michaels plans to increase its under-$10 product selection by 10 percent by the end of the year, according to Chief Merchandising Officer Stacey Shively. "It allows customers to still have fun with their shopping while staying within budget," Shively said.
The psychological impact of prices ending in .99 or .97 is significant. "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," Hennick observed. This perception makes purchases feel more justifiable. Andrew Harrison-Chinn, CMO of travel benefits company Dragonpass, agreed, noting that "Consumers naturally create spending thresholds in their heads, and staying below them makes a purchase feel easier to justify."
This trend can also lead to increased overall spending, as consumers may purchase more items than initially intended once they are engaged in shopping. "Once you're in the environment, you're going to spend, whether you have the money or not," Hennick said. "I think people are buying a lot more because it's the deal."
Some brands are also adjusting product quantities to maintain lower price points. Twisted Tea, for instance, introduced a four-pack option. While offering fewer cans, the lower overall price point makes it appealing. Similarly, smaller bag sizes for products like potato chips are becoming more common. "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 noted.
While recent reports from the Bureau of Labor Statistics showed a slight easing of consumer prices in June, with the annual CPI inflation rate falling to its lowest level in months, economists caution that higher inflation may persist. This phenomenon, known as "sticky inflation," occurs when consumers and companies become accustomed to rising prices, which can keep them elevated. Geopolitical events can also influence energy prices, impacting overall inflation.
Despite the complex economic landscape, the focus on under-$10 price points remains a key strategy for retailers seeking to connect with budget-conscious consumers. "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," said Lucas Coro, director of vendor sales at Digistore24 USA.