What Foot Traffic Reveals About Today’s Value-Conscious Consumer

0:00R.J. Hottovy: This episode of Retail Remix is brought to you with support from National Retail Federation. We've seen, you know, throughout the last year and a half, this is kind of very deal-oriented, very value-oriented consumer. But at the same time, it's still a resilient consumer. And I think where we've seen the most change is probably that middle-income consumer and moves to be defined as$75 ,000 to$125 ,000 in household income. This is a group that's been pretty used to a certain lifestyle the last couple of years, but inflationary pressures and other things have been catching up to them a bit. So we've seen some change in behavior.

0:37Welcome to Retail Remix. I'm Kate Robertson, Editor-in-Chief of Retail Touchpoints. And today we're digging into a question every retailer is asking. What's really happening with the consumer right now? Budgets are stretched, prices are up, and shoppers are voting with their feet, moving toward value and discount formats in ways that reshape where and how they spend. But is this a short-term reaction to a tough economy, or is it a lasting change in how people shop? To help us read the signals, I'm joined by RJ Hadevee, head of analytical research at placer.ai. He spends his days looking closely at foot traffic data, tracking who's visiting which stores, how often, and why.

1:21We'll talk trading down, the treasure hunt appeal of value retail, and what it all means for the holidays.

1:30RJ, thanks so much for joining us on Retail Remix. I thought first off, we should learn more about your background. Your job at Placer AI sounds so interesting. Tell us more about what you do there. Yeah, every day is a little bit different with what we do at Placer, but really our team, the analytical research team has three jobs. First is to produce content, bigger picture consumer behavior, retail traffic, restaurant traffic, overall big picture friends that we're seeing with our data. We have a site called The Anchor where we publish a lot of these insights. It's always fun kind of seeing what's going on in the consumer and being able to track that in the real time.

2:10If you see Placer in the news, that's generally our team. We're usually the one stock and reporters and kind of breaking it down at what's going on in the world there as well. And then a lot of times we will go in for our retail, restaurant, commercial, real estate clients, you know, dive into what's going on in their category, what's going on in their industry, what's going on in their consumers, how they're doing against their competitors. Maybe there's certain things they're trying to solve for in different markets and things like that. So it's really every day a little bit different. My background, I was a Wall Street analyst for over 20 years before coming in, before joining Placer.

2:44I think I was actually the first Wall Street analyst to use Placer data in my analysis. And it's just so interesting to see all the different ways you can apply it. You can get down to individual locations and see what's going on there. You can get down to individual retail chains and how bad I understand what it is that did making them so successful. in a lot of ways as an analyst this was always what we're looking for kind of this ground truth this this data that can really i think it's the most fundamental thing in terms of tracking the performance of the retailer and just being able to look at this on a day-to-day basis it's almost a cheat kind of thing being able to have that kind of granularity but it really can be applied in some of the different ways and the way i think of it's our data is kind of the way how many people go into a store how long they stay there where else they shop but then we also have other third party data providers that we put on top, you know, and with understanding the zip codes that people are coming from, we can get things looked down on graphic and customer segmentation and psychographic data on top of that too, and really answer that why and how things are changing out of particular retailers.

3:44So never a dull moment. There's always something interesting going on. There's always some retailer, commercial real estate customer that we're working with that are really trying to figure out what consumers are doing and get ahead of those trends with our data. Yeah. One of the things that we are always talking about at retail touchpoints is the state of the consumer who is under a lot of pressure these days with high fuel costs, inflation. So much is going on. Very much so. Yeah, to say the least. When you look at Placer AI's data right now, what is the state of the consumer? Yeah, I think you nailed it right there.

4:17It really has been a lot of, it's been a roller coaster for consumers the last couple of years. And I think, honestly, it's been some of the more dynamic periods that I can ever remember in terms of consumer behavior. It seems like from a behavior aspect, it changes day to day, even hour to hour in some cases. And it's interesting to see what happens with the data. I think, you know, taking it back to the beginning of last year, I think we saw a pretty major inflection point in the consumer behavior right around February last year. If you think back, that's when we started to hear about tariffs.

4:46We started to hear about government restructure. And we started to hear about immigration reform. And we started seeing things about egg cart surcharges at places like Denny's and Waffle House. And honestly, it was a lot for consumers to process. And effectively, what I think happened is we went from a consumer that was already pretty sensitive about pricing. you could see with our data anytime there was price hikes people would start to shop around to a wider number of locations they were looking for deals across more locations go into instead of just going grocery shopping they maybe were spreading out those visits to dollar stores or value grocery chains or maybe even convenience stores and so i think that's kind of been the mindset that we've seen you know throughout the last year and a half this is kind of very deer oriented very value oriented consumer but at the same time it's still resilient consumer and i I think where we've seen the most change is probably that middle income consumer and move slew to find it's 75, 125 ,000 in household income.

5:41This is a group that's been pretty used to a certain lifestyle the last couple of years, but inflationary pressures and other things have been catching up to them a bit. So we've seen some change in behavior. Maybe they are starting to trade out that normal grocery store visit for an Aldi or a Trader Joe's, or maybe they're mixing in other visits. But at the same time, too, there are certain discretionary purchases they're not giving up. They're not giving up that daily cup of coffee. Starbucks and the other coffee chains continue to do very well. UDM Wellness is a category that continues to do very well.

6:10So there is pockets of resiliency. I would say it's kind of in the small ticket indulgence type categories as opposed to big ticket. But it is still, there is still resiliency. So you're right, there's a consumer under pressure, but there are still some signs of strength when you look at the numbers. We keep hearing that shoppers are trading down as well. You mentioned some of the categories that will remain resilient through this time. Where are you seeing migration happen when it comes to foot traffic and what value and discount categories are really drawing in new traffic? There is some trading down, although it's kind of, in some cases, just picking alternative channels too.

6:51In a lot of cases, maybe expanding those retailers where you fill your food retail basket. good. I do think we, less so trading out than just kind of overall rebuilding that food retail routine. And that would include restaurants in there too. We do see a shift away from restaurants and the broader food away from home category to food at home. And that's multiple categories, but just based on the, the looking at the year of your visitation numbers, we do see strength and things like value and off price grocery. We're all the needles of the world, the private label firms that's done pretty well, though.

7:23The, the, the wrapping some pretty good numbers too. so maybe not quite as strong as we've seen the last couple of years. Convenience stores, particularly those who really invested behind the food program. So think of your Casey's, your Sheets, your Wawa's. Bucky's is probably its own category in its own right, but certainly we've seen that that's another one that's done very well. But they've taken share, I think, from some of the restaurant chains as well. So we do see signs of that, particularly in the food retail side. I think that's where if you have some evidence of trading out or trading down, that's where we've seen it.

7:53What was interesting too about that is actually this year's catalyst has been more gas prices. When we started to see gas prices go up, initially in late February, March, we continued to see this pattern where people were shopping a wider number of locations. But then when gas prices got above$4.50 per gallon, it was almost to the day, we started to see people shopping out. That was where we started the trading on. People just pulled back in general, but we started to see that continue. Outside of food retail, I would say it's kind of the off-price apparel. So the TJ Maxx, Ross, stores, Burlington, the world, even though they're lapping some pretty good numbers as well, that's where it should strengthen.

8:28And I think it works in some environment. We talked about this idea that this consumer used a certain lifestyle. They don't want to give up or want to keep up appearances. And so really when you can get quality brands at competitive pricing, that is an environment that works. That's a category that works. And we haven't really got into it yet. But if I had to call it right now, what category is 1-2026? It is warehouse clubs. So Costco, Sam's Club, PJs have all done phenomenal. They were already in great. And then when we saw the spike in gas prices, we saw huge spikes to the gas stations at those particular locations, you know, the ones in the parking lots there.

9:05That's continued. We're talking about double digit gains every week from those type of the club gas channel at this point. So I think that's one area too, where again, a lot of private label mixed there, a lot of good brands that you can get at competitive pricing. I think that's one of those areas where people are looking to stretch their household buddies right now. Fascinating. Yes, for sure. I can absolutely see that in a lot of the earnings that I've been covering is, you know, that gas plus loading up on your groceries trip just seems to be you get so much bang for your buck doing it all in one go for sure.

9:37Let's talk a little bit about off price apparel and compare it to off price grocery. From what I've gathered so far, it sounds like grocery might be outpacing foot traffic to off-price apparel retailers. But what are you seeing there? Yeah, I think if we actually look for the first half of the year, off-price retail, so off-price apparel, was actually one of the top performers. So if you just look at the first and second quarter, now some of that is because they continue to open up new locations. on a same-store visit basis. We're probably talking about low single-digit growth, but I think there's names within there of raw stores in particular.

10:14It's done a really good job from a merchant guys in perspective. Certainly outpaced that a bit. And then if you look at kind of overall grocery, that's been running about flattish. If you look at overall visits, it's slightly up. But if you look on kind of the same-store visit basis, it's only flat to slightly up. So we've seen, at least in the first half of the year, off-pressure retail or apparel was getting it. But that's, I think, slowly decelerated in July and August. I'm getting off larger because we're laughing. Some pretty tough comparisons in the year-ago period. I think looking at the categories themselves, I think they're kind of, you know, each category brings something different to consumers.

10:48I think you've got off-press apparel, which, again, I am a consumer that I do care about appearances. I may be feeling pressure. But off-press apparel has become a great way for me to kind of straddle that. I can get something at a pretty reasonable price, but it's still got quality brand names and nobody knows where I got it from. So I think that's one of those cases for middle income consumers in particular. That's been an area, that's been a category that they've gone for. It's been one of the top categories the last two years. Now on the off-price grocery, I mean, some of that is clearly trading down, people looking to stretch their household budgets, but it's more than that too.

11:23I mean, I think it's probably overly simple to call just low price and value because really they're doing a lot of innovative things. I mean, there are whole cottage industries devoted to what all these new flavors that they're putting on the shelves and new products. Obviously, the same thing with Trader Joe's. I think it really is this combination of, you know, I'm getting something unique that I can't get anywhere else. Some product that I really like that I'm really loyal to, but it adds still competitive pricing. The other factor, too, is just the experience part of it, too. the fact that they continue to invest in labor.

11:53Most of the stores are well-staffed. And so it really kind of checks all the boxes of the three buckets that you're looking for, competitive pricing, innovation, and experience. So I think they're doing a lot of that. And so Aldi has really done well, especially as they've started to move into, I would say, more middle and even upper middle income trade areas. They're starting to move upstream in terms of where they're opening up their stores. And the new stores can do very well there. And it resonates with the consumers in those markets. Yeah, it really is amazing seeing, you know, merchandising in some of these places, like even Five Below is a really interesting chain for young people, for kids and teens that, you know, it's mostly discount items, but they're always bringing in something cool and new and exciting that makes you, you don't feel like you're shopping in a discount store a lot of the time.

12:42I think you got it right there. And I mean, you know, everything we've talked about today, I think the common thread here is there is almost that treasure hunt aspect among all of the chains we're talking about, whether that be warehouse clubs, whether that be the off-price retail, off-price grocery. There is that treasure hunt aspect to it where I'm going in. I've got a few things I want, but I'm going to be surprised. I'm going to find something that I maybe didn't expect. And that gives me something to go talk to my friends and family about. And that's a big part of the overall story right now.

13:09It's not just dropping low prices. I mean, anybody can do that. But there still are clear winners and losers. and it's really the ones who are innovating and it's the ones that are staffing their stores appropriately. I know it's cost in this environment, labor is expensive, but we really do see pretty strong correlation between visitation trends and the ones that continue to invest in their labor. I think Starbucks, the comeback they're on, has been a really interesting phenomenon with that test because what we've seen is that, if you look the last couple of years when Starbucks had some struggles, it was never the total number of visitors that had dropped off.

13:39It was visit frequency, people just, hey, it was inconsistent experience. I couldn't get my coffee in the timeframe that I wanted it. Now, as they've continued to invest in the number of people who are working each store, I think that's, you know, had a pretty positive correlation with the fact that they started to see some improvement and dissipation trends the last few quarters. So I think that's another lesson here. What else could some of those mid-market or even higher end stores be learning from this as perhaps they feel pressure or they're seeing the impact of these trade downs or people getting excited genuinely about the treasure hunt at lower priced retailers?

14:18Yeah, it's a good question. And I mean, I think we have to kind of say, because I do think kind of the higher end, we do see signs of bifurcation that higher end consumer, whether it be fine dining, whether it be luxury department stores, those are holding up pretty well. I mean, that's that consumer who generally takes their spending cues from the stock market at a housing market, and they're feeling pretty good right now. So I think the high level guys have kind of done it. But I think the mid market guys, I mean, And I think some of the themes that we talk about, kind of the small indulgences, I think that's a big part of it.

14:47Creating things like that where maybe just to get people in the door, just, hey, maybe these little smaller ticket items that the everyday luxuries that people can afford. I think that's a big part of it. So, you know, that, you know, can be a low cost option, but it's also one that creates excitement. I just don't think there's enough of that across the retail space. You know, I honestly think, too, you know, just the look and feel of some of the stores right now. We haven't seen, you know, kind of some of the renovation. It's been a little slow in terms of remodel activity coming in. I mean, there was some that happened during the pandemic.

15:16But honestly, now that we're six years out, we're probably looking for some additional remodel. And just to, you know, bring this look and feel the stores to where they need to be. So I think just treating that excitement, whether it be from a product standpoint, from a merchandising standpoint, you know, and just the overall look and feel the store. again, you know, consumers don't want to feel like they're under pressure and if they can feel like, you know, this is a premium shopping experience and getting excited, that's where it wins.

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16:20Let's talk a little bit about geography and demographics. Are you seeing any regions of the U.S. doing anything differently? Are there higher numbers in certain parts or among certain demographics that you are noticing in your data? Yeah, it's a great question. Honestly, the amount of times when we're working with a particular retailer or restaurant brand, the questions they have, it's amazing to me how many times it comes back to migration. Because no matter where you live in the country, the last five years, the trade area you live in has changed greatly. You probably see some of it yourself, but don't fully appreciate how much it's changed.

16:58I mean, I think some of the big themes we saw coming out of the pandemic, we saw certainly movement away from some of the northern and western cities. So think of New York, Chicago, Minneapolis, Detroit on the west, San Francisco, Los Angeles. And where that migration happened was to the, and this shouldn't surprise anybody, but to the southern markets. So Phoenix, your big four markets in Texas, Central Florida, the Carolinas, and even Washington, in D.C. to some extent. So we saw a lot of migration away from some of these markets into these other markets. We also saw a movement away from more urban to suburban and rural.

17:31So people moving out to the suburbs are even more rural. And, you know, the other thing that we've seen though, and I think this is the really important takeaway, is that not all that migration is created equal. Yes, we've seen a lot of movement into Texas and Central Florida, but it's very different in terms of movement in there. So for example, Central Florida saw a lot of the Northeast, you know, kind of the Northeast corridor move there. And so generally ends up being a higher household income population moving there in the Carolinas, whereas Texas is actually a lot of lower income, multi-generational families.

18:02And so I think it's interesting when you look at the data, you know, we've got a lot of operators in the Dallas market who, hey, we saw a lot of growth there. We wanted to open up stores, but then what ended up happening, you know, that first ring around the city where we have seen a lot of movement of lower income, multi-generational families, if that doesn't match what your target audience is, you may find your store is not doing quite as well as you thought. So I think that's a really important takeaway is that with our data, you can check out how the makeup of a trade area is changing almost in real time.

18:34Environmentally, our data for an individual store is about a three-day lag. And for a market, it's about eight weeks because we need to make sure that that's not just a vacation or somebody stopping by, but somebody has moved there. But it's really interesting to look at the data on that front. So we've seen a lot more competition and a lot of shifting of the trade area. I'd say the Central Florida is another one where we've actually seen so much, well, there's been a ton of population growth. In a lot of cases, there's actually more retailers and restaurants. So we have her pretty, from a lot of people that, you know, Central Florida, you know, this used to be one of our best markets, but all of a sudden it's not working as well.

19:07And so we think it's actually just the amount of competition, the amount of brands that have started to move there has been very, very interesting to watch. And I'm not sure quite there yet, but, you know, we did see at least some indication supply demand imbalance where there's just too many stores in some big markets. So it's not a surprise that maybe I'm a new restaurant chain that put a store in there and all of a sudden is doing about half the number of visits that I do in other parts of the country. So it is something you have to be mindful of is that, again, no matter where you are, there's a lot of change going on and you have to make sure that you're really matching what the, you know, the makeup of that area is.

19:40When we talk about value and, you know, just people being more value conscious in general, do you think that this is temporary? You know, wallets are stretched and or do you think this is sort of more of a structural change in how people are shopping? I think it is something of a structural change. I think that the idea of treasure hunt is something that is going to continue for some time. I think people enjoy, you know, stretching their household budgets and being able to save it for other things, whether that's experiences or other services or things like that. So I do think there is some element of structural change here.

20:15Now, that said, if we did see, you know, acceleration of wage growth or something like that, and people have more money in their pockets. Yeah, I think that, you know, certainly they probably spend a bit more. I mentioned that, you know, we've seen small indulgences being kind of where we've seen the strength and discretionary. There certainly was pen clip demand for big ticket purchases, but I just think that, you know, people's wallets are holding them back on that front. So So I do think that people found more money in their wallets, but they'd certainly go out to shame and start to know Bob.

20:42I mean, we see this with some of the luxury stores where, you know, if you look at the overall visitation data, it's gelling down year over year. You know, but we continue to see that high on consumer shop, though. It's just that middle income, that aspirational consumer that really just pulled back and reallocated what they're spending on in other places. So I do think with wage growth that we could see it come back. But I do think the idea of being thrifty and saving in other parts is probably here to stop. Yeah. And as we've seen, I think prices don't tend to come down on these items, right?

21:14They really don't. They generally do not come down. Although, I mean, I do think that Walmart, Costco, Amazon, a lot of these companies are being very mindful about that. And some of the rollbacks they've done, even I'd say even the traditional grocery stores, the Albertsons, Kroger's are the world that done an okay job doing that as well. So there has been some pullbacks and pricing. But you're right. It's harder to do once they're there because you kind of build your model on that new price point. Yeah, we'll see. And it's one that I think it's there. And that's why you kind of need that other side of the equation, the wage growth to really help offset that.

21:48Tell me more about frequency and basket behavior. Are people visiting these stores more often and are they buying more or less? So it depends on, you know, kind of the category. But by and large, we've seen that the number of visits the last couple of years, particularly in food retail, is up. And if you look at kind of your food at home kind of categories, like grocery visits are up in the high teens from 2019 to 2025, or year to date, I guess. Dollar discounts from the mid-20s. Super stores are in the teens as well. And gas station convenience stores are in the teens as well. So you see the total number of visits.

22:26And it kind of is this idea, I think, particularly when we started in 2000, late 22 and 23, when we started to see the real ramp up in inflation, both food at home, food away from home, that was when people did start to shop to a wider number of locations than they had before. So that's really where that increased. And some of the visits too are just because there has been some consolidation, there's more stores. So that's some of the element, but we have some disindication that people are shopping around. Now, what's interesting when we layer other data on top of ours, things like, or using our data in other ways, like looking how long people stay in the store in all time, that has come down.

23:00So people are going into the stores more often, but spending less time in there. You know, some of that is probably the buying line, pick up in stores. You just do that. You go in quicker. Some of that is people are getting smarter about doing homework ahead of time going in. I mentioned in the beginning, people are more aware of prices and hyper aware of prices than, you know, they're really sensitive to pricing than ever before. And so they're doing their homework before they go in on this thing. And so if you know exactly what you want, you see that as well. So we have seen, and with less dwell time, the basket size has gone too and gone down.

23:32So when we look at our visitation data with government retail sales and other data sets like that, we do generally see that the basket size has gotten smaller. The dwell time phenomenon is something we've seen across really almost every retail category. I mean, we've seen by and large, I think a high single digit decrease in the amount of time people are spending in stores. So that has gone down. And again, I think it is a byproduct of people just getting smarter and knowing exactly what they want when they go in the stores. There's probably some technology aspects to things like self-checkout and other things that get people out quickly.

24:04Not always, but, you know, we don't have a ton of categories where world time's going up. And in fact, just a couple that we do see, one is like fine dining. And again, you know, people may not be going out to that nice restaurant as often as they want. But when they do, they enjoy their time. They take their time. And the other one is wireless stores as well. So just as it takes longer to kind of negotiate that contract. And there we have seen the 12-timer, those kind of stores go up. Interesting looking at all the different trends, but there has been kind of an industry-wide decline in the amount of time people are spending them.

24:34Yeah, it does seem, you know, we read this all the time in our various reports we receive about, you know, how much more time people are spending on using AI to do lots of research and comparison shopping. and they go into stores knowing far more about what they're looking for than they used to. Do you have any sense of, yeah, how AI research or online discovery is impacting foot traffic in addition to perhaps spending less time in stores? Yeah, I think that's the big one. I mean, I think that that allows consumers to go in and navigate things quicker than they had, but also allows them to have better educated conversations, particularly for more complex or more specialized product categories.

25:14I think that's where we've seen, you know, that can sort of lead to it. And I do think that the idea of, you know, kind of shopping around also kind of sees the idea that people are shopping a wider number of locations because they can use AI tools to identify those type of deals that are out there. Yeah, this is it really is kind of interesting to watch. I mean, at this point, I mean, everyone has a device or access to AI that can tell you effectively what price you paid on that last transaction or, you know, are there potentially going to be a price increase? And consumers will try to get ahead of that.

25:45We talked about shredder hunt being a major catalyst for behavior. But if you feel like you're going to get a deal and if you wait and, you know, like a week later, you're not going to be able to get that. That's also a very powerful catalyst, as we all know, to get people in stores. And so I think that's become a powerful driver is that ability to kind of predict when prices are going to go up and try to get ahead of that. OK, last question, because we are all wondering how holiday will play out this year, considering all the pressures. But also people say they're going to spend less and they often don't actually do that.

26:17Right. I'm so curious. Do you think that people will be trading down for their holiday shopping? Will they spend as much as always? What are you thinking? I think the wild card honestly is where gas prices go from here. if we kind of stay this kind of low four, kind of in between four and 4.25 per gallon, I think it ends up being a pretty positive holiday where people, you're right, I mean, people say they want to pull back, but they end up spending quite a bit at the end of the day. So, you know, from a visitation standpoint, I do think the thing we're going to see is it's going to be the earliest we've ever seen a holiday.

26:54And then we're already starting to see holiday promotions hit and it just, the calendar's flipped to September. So I think that's going to be one of those stories is that retailers are looking to log in that holiday purchase earlier than ever. And so you can start seeing holiday emails in September. Last year, October was a pretty good month. Some of that was holiday. Some of that was Halloween, which has become a bigger holiday in its own right. But that was still kind of the earliest we'd seen this kind of promotional period. And now I think it's going to end up continuing to get earlier and earlier.

27:22That means we'll probably see a little bit of a lull in that kind of November time period where that's usually traditionally the strength of the shopping season. But certainly for the Black Friday and the week ahead of the holidays, we've probably seen some pretty good travel. But I think at the end of the day, I mean, I think it is a consumer that's resilient. I do think that we will probably see probably more small ticket type indulgences kind of be purchased instead of the big ticket items. But I do think at the end of the day, people will still manage to make a lot of purchases for holidays.

27:49So we're expecting a pretty positive one. Yes, it is wild seeing back to school Halloween and holiday all at once. It really is all we can gather at this point. RJ, thanks so much for joining us. Thank you for having me. Thanks for joining us for another episode of Retail Remix. Be sure to subscribe so you don't miss a future episode. You can find us on Spotify, Apple Podcasts, YouTube, or your favorite podcast app. Until next time, keep mixing it up.