Expensive gas slows foot traffic
A new study indicates that retailers are taking a hit in foot traffic across the board due to fuel cost inflation.
Retail experienced a mostly downward shift in foot traffic in March, according to a study by Placer.ai. During the week of March 7, U.S. retail experienced its most severe decline in retail foot traffic in over 12 months, excluding declines tied to COVID-19 waves or holidays.
While consumers had not been changing their shopping habits much in response to inflation up until early March, gas prices now seem to be influencing shoppers to avoid visiting stores. As gas prices continue to rise there is an expectation that it will continue to suppress retail foot traffic, especially among lower income consumers.
Grocery, supercenters and discount/dollar stores are all experiencing drop-offs in foot traffic. The only current winner appears to be Costco, which is doubly well positioned, due to its cheap gas prices and potential to let customers consolidate grocery visits.
Other verticals are experiencing issues, as well.
Electronics retailer Best Buy reported a year-over-year downturn in foot traffic in March, according to Investor Place. The retailer’s stock dropped in response to the traffic decline, as analysts look for bellwethers of a drop-off in discretionary spending.
Throughout the pandemic, store foot traffic has fluctuated as waves of infection have ebbed and flowed. Early on, many anticipated that customers would rush back to stores at the first sign of the virus waning, though the rebound caused by the Delta and Omicron variants led to the reinstatement of some mitigation policies and led some customers to again avoid public places.
Prior to the last month, however, some operators saw foot traffic bouncing back. During the 2021 holiday season, while some sources reported a sales decline attributed to inflation and the beginning of the Omicron surge in the U.S., Jason Goldberg wrote in Forbes that this position was “completely wrong,” and pointed to the return of normal retail foot traffic as compared to 2019 numbers.
- Gas Price Inflation Hits Retail Foot Traffic: What Will Be the Ripple Effect? – Placer.ai
- Why Is Best Buy (BBY) Stock Down Today? – Investor Place
- What Retailers Need To Learn From Holiday 2021 – Forbes
DISCUSSION QUESTIONS: Do you think that foot traffic to stores will continue to slow due to fuel costs and other inflationary pressures? What can retailers do about it?