Placer.ai sizes up consumers' spending habits amid inflationary prices

How are the economic headwinds impacting retail performance, and what categories are beating the curve?

Following a strong January—driven at least partially by the comparison to an Omicron-impacted 2022—retail traffic slowed somewhat as consumers adjusted their spending habits to inflationary prices, according to the Placer.ai Quarterly Index - Q1 2023.

Key takeaways from Placer.ai's Index:

• Discount and dollar stores: Overall visits during Q1 were up 2.2% year-over-year, with Ollie’s Bargain Outlet (year-over-year increase of 7.2% quarterly visits in foot traffic) and Dollar Tree (7.4% quarterly visits increase) leading the way.

• Superstores: Visits were down 4.1% year-over-year, and Target was the only brand analyzed that saw an increase in foot traffic over last year's quarterly visits. At Target, visits were up 1.5% during Q1.
• Grocery: Visits fell 4.3% year-over-year, as grocery stores likewise saw a decline in foot traffic overall. Top performing brands include Metro Market (17.9% quarterly visits increase year-over-year), Grocery Outlet (11.6% quarterly visits), Trader Joe’s (8.8% quarterly visits) and H Mart (5.3% quarterly visits).

• Overall retail visits fell 4.2% year-over-year, and some of the pandemic's strongest categories—including grocery and superstores—also saw visit dips. And while some of the traffic decrease is due to the success—and the unique behaviors – these sectors last year, the drops also signal that 2023's retail landscape is going to look different from what we've seen in recent years.
• Still, despite the challenges, some categories continued to impress, including discount and dollar Stores, which exceeded 2022 levels—a noteworthy feat given their strength over the past couple of years.

[Read more: Placer.ai sizes up how discount, dollar stores foot traffic is faring]

• Many discount and dollar store chains—including visit share leaders Dollar Tree and Dollar General—have expanded significantly in recent years, with foot traffic to the category consistently ahead of pre-COVID numbers. Now, visit data indicates that growth is beginning to slow down, with March traffic remaining close to 2022 levels. Still, the sector’s success in maintaining its pandemic-era visit gains despite the volatile economic environment indicates that discount and dollar Stores are now embedded in many consumers’ regular shopping routine.

• With the exception of Ollie’s Bargain Outlet—which saw a significant increase in YoY visits but just a 1.1% increase in visits per venue—YoY visits to most Discount & Dollar Stores tracked closely with YoY visits per venue. Since visit and visits-per-venue trends tend to get decoupled when a chain expands or contracts its store fleets, the correlations between YoY visits and visits per venue indicate that the recent expansions undergone by many discount and dollar stores largely normalized in 2022.

• With the exception of the first week of January and the week of Valentine’s Day, superstore Q1 2023 visits mostly stayed below 2022 levels—perhaps another sign that 2023 consumer behavior is likely to be quite different from that which we’ve seen in recent years. But while some Superstore patterns are shifting, other aspects of the Superstore industry remain the same. Walmart is still the undisputed leader with 57.8% of the visit share in Q1 2023, and the brand is investing in automation – both in-store and at its fulfillment center – to maintain its lead over its competitors.

[Read more: What key trends will emerge in the retail sector in 2023?]

• The superstore category performed well in Q1 2022, making YoY comparisons challenging. Still, Target—the second largest Superstore chain—saw its visits and visits per venue grow relative to Q1 2022. The chain’s success could be partially due to its appeal to younger shoppers, its expanding portfolio of brand partnerships and shops-in-shop, and its assorted private labels appealing to a variety of customers.
• The pandemic brought grocery visits to record peaks, as interest in elaborate home cooking skyrocketed and many consumers clung to any reason to leave the house. But the category has experienced particularly steep price increases, and as inflation replaced COVID as consumers’ primary concern, Grocery traffic fell. But as more grocers build out their private label options—which are typically priced lower than better known brand names—consumers who shifted some of their food shopping away from traditional grocery stores may return and bring traffic back up.

• Even as many major grocery labels see YoY declines, some smaller brands are seeing traffic increases—indicating that despite the economic headwinds, there is still room for growth in the grocery space. For most of these growing brands, the increases in visits are larger than the increases in visits per venue, so at least some of the traffic gains are likely due to expansions. Still, the fact that these grocers are building out their store fleet while maintaining positive or neutral visit-per-venue numbers means that the expansions are meeting with a ready demand.

To view the report, click here.