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Foot traffic report shows consumers trading down due to inflation

Rising inflation and gas prices has reached consumer spending, according to a new report from Placer.ai.

In May 2022, U.S. retail sales fell by 0.3% from April as consumers adjusted to inflation and changed some shopping habits. Some categories have fallen, but others have picked up the slack, the report said.

To better understand these trends, Placer.ai looked at year-over-year foot traffic patterns for major retail, dining, and hospitality sectors.

Fast Food and QSR vs. Full-Service Restaurants
Following the ebb of the COVID Delta wave, YoY foot traffic to full-service restaurants picked up in late 2021, and in late November and December, YoY visits to full-service restaurants outpaced YoY foot traffic to fast food and QSR chains. And while visits to full-service restaurants fell again in January 2022 due to the rise of the Omicron variant, foot traffic to the category had recovered by mid-February 2022, with YoY visits to these locations outpacing fast food and QSR YoY foot traffic for 3 out of 4 weeks from mid-February to mid-March.

But as inflation and gas prices continued to rise, YoY visits to full-service restaurants fell dramatically. Since the week of March 14th, 2022, YoY QSR visits have outperformed equivalent foot traffic to full-service restaurants. For the week of June 6th, fast food foot traffic was up 7.3% whereas visits to full-service restaurants were down 4.0% on a YoY basis.

All charts from Placer.ai

Grocery and Superstores
For much of 2021, YoY visits to the grocery sector were growing faster than those to superstores. And throughout late 2021 and early 2022, YoY visits to grocery stores and superstores were neck and neck. Some weeks, superstores pulled ahead of grocery, and in others, grocery outperformed superstores.

Since the week of April 11th, however, YoY superstore foot traffic has consistently outpaced grocery visit increases by a wide margin. The week of May 30th, 2022, superstore visits were up 5.4% and grocery visits were up 1.7% compared to the equivalent week in 2021. Those looking to save money on their routine shopping may be drawn to superstores for the lower prices and their one-stop-shop nature which helps customers consolidate their shopping and save on gas.

Grocery Still Growing
Of course, some grocery brands – specifically chains known for their emphasis on low prices – are still seeing an increase in visits. And the grocery category as a whole is still seeing positive YoY visit trends despite the overall retail downturn, which indicates that this space is still benefiting from grocery’s value orientation.

The grocery sector may also be seeing an increase in consumers trading down restaurant outings in favor of gourmet home-cooked meals. This could explain the success of certain value-focused grocers, such as H-E-B and Walmart Neighborhood Market that saw a 2.8% and 9.2% increase in YoY weekly visits, respectively, for the week of June 6th, 2022.

Dollar Stores’ Grocery Offerings Boost the Category
Dollar stores may also be encroaching on some of superstores’ and grocery’s visit share. During the recession of 2008 and 2009, many dollar stores expanded and increased their foodstuff selection in response to the increased demand. Now, as visits to the category continue to grow, some dollar stores are diversifying their grocery offerings even further and adding fresh fruits and vegetables.

Five Below and Dollar General are two of the discount and dollar stores that have seen impressive growth in recent weeks, with YoY visits for the week of June 6th, 2022 up by 7.0% and 12.3%, respectively. This performance is particularly noteworthy given that this time last year, visits to both brands were already up by double-digits relative to pre-pandemic. Should dollar stores continue to invest in building out their grocery division, foot traffic may rise even further.

Consumers Looking for Cheaper Alternatives to Their Regular Shopping
The data from the grocery, dining, apparel, dollar stores, and shopping center sectors indicates that consumers are “trading down.” As the cost of living increases, consumers are substituting their regular stores and restaurants with lower-priced options in an effort to stretch their new budgets.

The change to consumer behavior may have a long-term impact on the retail space. After all, one of the catalysts for dollar stores’ recent growth was the 2008 recession which drove many value-focused customers to visit these stores for the first time. And once the recession lifted, many of these new customers continued shopping at Dollar General, Dollar Tree, and other discount brands. Some of the consumers who now realize that they can get similar items at superstores or off-price retailers may think twice about visiting grocery stores or department stores once the economic outlook brightens.

For more data-driven retail insights, visit placer.ai.