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Foot Traffic Analysis Reveals Consumer “Trade Downs”

First, much of the retail sector took a hit during COVID-19 quarantines and stay-at-home orders. Second, as COVID morphed from pandemic into a (more or less) endemic status, the retail sector began growing. These days, in the face of increasing inflation and gas prices, the retail sector is, once again, seeing a decline in foot traffic and, by extension, a potential reduction in consumer spending.

But this isn’t the case across the entire retail sector. A recent report issued by research firm Placer noted that, even as U.S. retail sales fell by 0.3% in May 2022, not all retail categories are feeling the pain. Placer analysts note that consumers are trading down from higher-priced products and services to less-expensive alternatives.

For example, while visits to full-service restaurants dropped dramatically, visits to quick-service restaurants are on the rise. Placer analytics report that during the week of June 6, 2022, fast food traffic had increased by 7.3% year over year. Meanwhile, during the same time period, visits to full-service restaurants had decreased by 4%.

Meanwhile, the grocery category overall is still experiencing year-over-year growth, especially among those brands known for lower prices. The Placer analysts also point out that consumers might be trading down visits to restaurants, while increasing their at-home cooking. This could explain why value grocers, such as Texas’ H-E-B and the national Walmart Neighborhood Market chain experienced a 2.8% and 9.2% year-over-year growth in visits.

Additionally (and perhaps unsurprisingly) dollar stores have been doing quite well; Placer analysts note that this retail segment could be eating into superstores’ and grocery’s visit share. During the week of June 6, visits to Five Below and Dollar Store showed a year-over-year increase of 7% and 12.3%, respectively. As a result of increasing demand, NASDAQ reports that Dollar Tree is planning to complete 800 Family Dollar renovations nationwide during its fiscal 2022 as part of its key real estate initiatives. The company also announced plans to open 590 new stores (400 Family Dollar and 190 Dollar Tree) during the same period.

Still, foot traffic might not tell the whole story. Marcus & Millichap’s 2Q 2022 Single-Tenant Net-Leased Retail report indicated that elevated fuel costs are changing not just how consumers shop, but how often. Many are frequenting fast-food chains near where they live. And when it comes to grocery visits, consumers are making fewer trips to grocers, while increasing items purchased per visit.

Speaking of grocers, McKinsey & Co.’s “Navigating the Market Headwinds: The State of Grocery Retail 2022” report notes that a “steadying but still fragile supply chain” and increasing labor costs as sector challenges. Consumers will likely seek out less expensive and more nutritious foods, while taking advantage of online and delivery orders, all of which could have an impact on physical real estate demand.


Inside The Story

PlacerMarcus & MillichapNASDAQMcKinsey

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