Inflation is pushing price-conscious shoppers away from Walmart. Luring her back isn’t easy, experts say – National

Walmart Inc. WMT.N could face an uphill battle to win back US shoppers who chose the neighborhood dollar store or Aldi rather than continue to a Walmart supercenter when gas prices dropped US$5 dollars per gallon.

While gasoline prices have fallen nearly 20% over the past month, there’s no sign of shoppers returning to the country’s biggest retailer, according to foot traffic data verified by Reuters and analysts.

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Inflation remains at a 40-year high, eating away at a large chunk of many Americans’ grocery budgets, particularly Walmart’s legions of cost-conscious shoppers.

According to data from Placer.ai, a location analytics company, walking traffic at Walmart’s 3,573 U.S. supercenters and its 370 discount stores (as of January 31, 2022) decreased by an average of 2.7% from June 1 to July 25 back to the previous year.

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Meanwhile, traffic at Aldi ALDIEI.UL, owned by German discounter Aldi Sud, rose 11.5%, and shopper visits rose 4.1% at Dollar General.

The question of how to reverse the loss of foot traffic will likely be a focus for analysts when Walmart reports second-quarter results on Aug. 16.

It may not be easy – or cheap.

Burt Flickinger, executive director of Strategic Resource Group, said Walmart needs to invest more in local advertising to get people back into stores.

Reducing local newspaper ads has become Walmart’s “Achilles’ heel,” Flickinger said. If the company wants customers to return, Walmart will have to spend more money on “quality ads” that highlight promotions and rollbacks.


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Walmart shoppers have a median household income of $73,000, according to data from Numerator, a consumer information company.

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In June, inflation hit 9.1%, a four-decade record, while gasoline prices rose to an average of $5.006 a gallon (June 13), up from $3.161 a year earlier, according to the US Energy Information Administration. According to several economists, higher gasoline prices have cut the typical low-income American’s monthly spending budget by hundreds of dollars.

Walmart CEO Doug McMillon has previously described the retailer as an “inflation fighter” and a top destination for shoppers in recession times. But Walmart’s share as the top choice for grocery shopping fell to 25.5% in July from 27.4% in June, according to a monthly consumer survey by Prosper Insights & Analytics, cited in a Cowen & Co statement.

McMillon recently told investors that shoppers — particularly from low-income households — bought fewer items in the three months ended April 30, despite consolidating their visits to stores in response to higher fuel prices.

According to GlobalData, monthly gas spending rose to 5.57% of earnings for a typical American household — who earn $5,412 a month after taxes — in July in July, up from 2.79% of earnings in December 2019. Poorer households generally give one spend more of their income on gas and essentials.

Walmart Supercenters, which average about 17,651.6 square feet and sell groceries and deli as well as clothing, home products, and electronics, are typically located outside of major metropolitan areas, requiring many shoppers to drive at least several miles. Supercenters don’t sell gas.

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Both Walmart and Target Corp TGT.N issued profit warnings over the past two months, noting that U.S. shoppers have responded to the rising cost of living by primarily buying lower-margin groceries and other essentials while shopping for clothing and sporting goods skipped filled aisles.

Walmart’s late July warning was “a diagnostic look at the average American household,” said Jefferies analyst Stephanie Wissink. It showed the pressure on shoppers’ monthly budgets that prompted many to limit their visits to grocery stores, she said.

Traffic dropped at Target’s 1,937 stores from mid-June through the week of July 25, data from Placer.ai shows.

While Walmart has the advantage of offering more choice, the dollar stores’ cheaper locations offer an advantage when fuel prices are high, said Jason Benowitz, senior portfolio manager at Roosevelt Investment Group.

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The number of shopper visits to Dollar General DG.N stores increased for all weeks of June and most of July compared to the same period last year, the data shows. Dollar General operates more than 18,400 stores in the United States, compared to Walmart’s 5,342 US stores, according to its most recent annual filing.


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Placer.ai did not provide data on other dollar store chains such as Family Dollar and Dollar Tree DLTR.O. However, the Quarterly Dollar Store Index shows that walk-in traffic to discount stores increased 8% year over year in the second quarter and 13.2% compared to the most recent quarter.

“The driving distance for a typical shopper in much of the United States can be twice as long to reach the nearest Walmart compared to a dollar store,” Benowitz said.
(Reporting by Arriana McLymore and Siddharth Cavale in New York, editing by Vanessa O’Connell and Matthew Lewis)

https://globalnews.ca/news/9054241/inflation-budget-shoppers-walmart/ Inflation is pushing price-conscious shoppers away from Walmart. Luring her back isn’t easy, experts say – National

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