The decline of American shoppers has been greatly exaggerated.
According to new quarterly earnings reports and other data: Consumers are still spendingThey're just being more careful and prioritizing big box stores. Inflation ColdIn that respect The Federal Reserve is widely expected to cut interest rates. next month. High mortgage interest ratesThe Federal Reserve's efforts to keep interest rates generally high for an extended period of time continue to discourage spending on big-ticket items. Housing-related projects.
These conditions are impacting brick-and-mortar retailers across industries in different ways. Quarterly earnings reports over the past few weeks have shown a somewhat polarized retail market. winner and loser Pitched Fighting for consumer dollars.
“Consumers are on a tight budget right now,” Greg Zaczkowitz, senior e-commerce specialist at marketing platform Omnisend, said in an interview. “They're anxious, and they're going to be more intentional with their spending going into the end of the year.”
This cautious spending stance underscores why Walmart CEO Doug McMillion attributes the retail giant's recent success to a focus on value and convenience. These priorities include Walmart attracts shoppers of all income levelsThis is especially true among affluent consumers.
During McMillion's second-quarter earnings report this month, the retailer Over 7,000 items discounted “Customers at all income levels are looking for value, and we're delivering it,” McMillon said.
slash prices to attract inflation-weary consumers It's also a strategy that's helping Target grow. Moody's vice president Mickey Chadha said the strategy worked because Target “had the right inventory and the right products.” In May, Target 5,000 everyday itemsFrom meat and bread New semester A must-have.
As consumers increase Buy with purposesome Increasing credit card debtRetailers Adapting to changeThey quickly realized that if shoppers don’t need or value a product, I won't buy it” Chadha said.
Walmart Online and In-store strategy The basis for fierce competition Retail LandscapeChadha said the strong second-quarter performance was consistent with the previous quarter and was mainly due to a focus on food, which attracted more shoppers and drove more traffic into stores, an approach that also attracted higher-income consumers, broadening the company's customer base. Report from pedestrian analytics company Placer.aiVisits to Walmart increased about 4% in the second quarter compared to the same period last year.
With inflation still hitting middle-class consumers hard, these shoppers are looking to buy more, said Jerry Sheldon, vice president of technology at market research firm IHL Group. Look to affordable stores like Walmart.
“The current economic situation is clearly favorable for Walmart,” Sheldon said, adding that as more consumers continue to “live before payday,” Walmart will gain an even larger market share.
Costco and BJ's Wholesale have also seen success with their focus on value. Costco, for example, saw a 12.2% increase in foot traffic year over year in the second quarter, according to Placer.ai. BJ's saw a 7.4% increase during the same period. Shoppers are also staying longer in Costco stores, with average foot traffic exceeding 1,000 people. The Costco run lasts more than 37 minutes.Costco is A Netflix-style crackdown on non-members.
“Consumer buying behavior remains value-driven,” BJ's Wholesale Inc. Chief Executive Robert W. Eddy said on the company's second-quarter earnings conference call this month. Executives mentioned the word “value” nearly 50 times during the call, according to FactSet. Higher-income consumers are seeking food, clothing and electronics, but big-ticket items like patios are remaining on the shelves, Mr. Eddy said.
“They're waiting for a price drop,” Eddy said of shoppers. “They're waiting for a promotion.”
In contrast, Macy's has struggled. Department stores know it well That's it.
“Consumers are becoming more picky,” Macy's CEO Antony Spring told investors on the company's earnings call last week.. Macy's is Poor sales Increased competition from online and discount retailers;Earlier this year, Macy's It will close hundreds of stores and lay off employees. Reduce costs, Streamline operations.
Off-price retailers like TJ Maxx Consumers are shifting towards value.
TJ Maxx's parent company, TJX, Sales increased 6% Low prices were the driving force in the most recent quarter, and TJX CEO Ernie L. Herman told investors this month that the company is “confident that consumers will continue to seek value.”
As Home Depot and Lowe's Surviving these trendsRival home improvement stores Adapt your strategy They're responding to growing competition and changing consumer tastes. Even higher-income consumers who are more likely to make home improvements are putting off spending due to rising interest rates and the prospect of future rate cuts, Christina Boni, senior vice president of corporate finance at Moody's Ratings in New York, said in an interview.
“The housing sector is taking a breather,” Boni said, “as consumers shift their spending to other areas such as services, travel and entertainment.”
Michael Zackour, chief strategist at business consulting firm 5 New Digital, said consumers are now “looking for better experiences, little luxuries, deals on essentials and quick getaways rather than big-ticket items or projects.”