Foot traffic in department stores is decreasing, but showing signs of recovery, according to a recent report.
Department Stores Experience Uneven Impact from Inflation
Inflation has brought varying fortunes to department stores. According to a Placer.ai analysis, Dillard's has experienced the steepest decline in foot traffic among four major department stores - Dillard's, Kohl's, Macy's, and Belk - over the past four months. The worst hit was in June, with a drop of 20.9% compared to the same period last year.
While luxury department stores, such as Neiman Marcus, Bloomingdale's, Nordstrom, and Saks Fifth Avenue, have also seen a drop in visits, the decline was less pronounced for these upscale retailers. Nordstrom, for instance, saw a year-over-year drop of 9.7% in August, the highest among the luxury stores. Disappointingly, Saks Fifth Avenue was the only luxury store that showed growth in visits between June and September, albeit minimal at 0.6% in August.
The analysis reveals that mid-range retailers might be handling the inflation woes better since the growth in 2021 was primarily driven by stimulus payments and store reopenings following COVID-19 pandemic shutdowns. The smaller gaps in visits for luxury retailers are attributed to the resilience of high-income consumers who are less affected by inflation compared to their middle- and low-income counterparts.
The decline in foot traffic at Macy's can be attributed to the closure of several full-size stores this year. In July, the retailer replaced its full-line Macy's store in the St. Louis area with a Market by Macy's concept at the Chesterfield Commons.
Recent studies suggest that consumers across income levels may make adjustments to their spending as inflation rises. While nearly half of shoppers earning less than $50,000 a year are planning to significantly reduce their holiday spending, only 24% of high-income shoppers are cutting their budgets. On the other hand, low-income consumers plan to spend 25% more compared to last holiday season, but high-income consumers are only spending 7% more than last year.
The Placer.ai report provides an insight into how inflation is disproportionately affecting stores, prompting consumers to adjust their spending habits according to their financial situation. The report sheds light on the varying performance of department stores and offers a glimpse into the complexities of navigating the retail landscape during inflationary periods.
- Given the disproportionate impact of inflation on various retail segments, artificial intelligence (AI) can be used to predict and analyze consumer spending patterns, thereby helping businesses in the finance and retail industry adjust their strategies.
- The resilience of high-income consumers during the current inflation period can be attributed to their personal-finance management skills, which allow them to withstand economic fluctuations more effectively compared to their middle- and low-income counterparts.
- The analysis of foot traffic in department stores during the pandemic and subsequent inflation reveals interesting trends, such as mid-range retailers possibly coping better with inflation due to the stimulus payments, while luxury retailers have experienced a less pronounced drop in visits due to the resilience of high-income consumers.
- As inflation continues to pose challenges for retail businesses, it is crucial for industry leaders to adapt and innovate, embracing AI and data-driven strategies to best cater to the evolving spending habits of their consumers.
