Although the gas price hike has finally slowed down, the national average price per gallon is still up 71.5 cents from a month ago and $1.37 per gallon higher than a year ago. We dove into the foot traffic data to find out how rising gas prices and elevated food prices are impacting retail visitation trends.
Steep Decline in Overall Retail Visits
Over the week of March 7th, nationwide overall retail visits declined by 4.3% compared to the equivalent week three years ago – the most severe decline in weekly retail foot traffic over the past twelve months that wasn’t directly tied to COVID waves or holiday calendar shifts. And while visits the week of March 14th bounced back somewhat (more on that below), the downward shift remains evident. So although consumers had largely shrugged off price inflation over the past several months – perhaps due to mass merchants and larger format grocers’ willingness to keep price increases in check – the spike in gas prices appears to be having a marked impact.
Should current trends continue, the rise in retail gas prices is likely to continue to weigh on overall retail traffic – particularly on those retailers that have greater exposure to lower-income consumers where gas makes up a higher percentage of household budgets.
Implications for Consumer Spending
Inflation is now simultaneously hitting three of consumers' basic necessities – food, gas, and housing (via elevated rent inflation) – with rising gas prices likely to impact foot traffic across many retail channels. Below, we’ve shown year-over-year foot traffic trends for the grocery, superstores (including warehouse clubs and mass merchants like Walmart and Target), and discount and dollar stores.
So far, there has not been a meaningful shift between shopping channels. Each of these categories had been running solidly ahead of year over year visitation trends the past six months, but now find themselves at low-single-digit increases. In other words, the foot traffic data shows that visits for all three analyzed categories have been adversely affected, so consumers don’t seem to be trading down from mass merchants and grocery stores in favor of dollar stores.
Historically, large increases in retail gas prices over a short period of time have disrupted retail visitation trends, so it’s not surprising to see the deceleration in foot traffic across several retail categories the past few weeks after the record increase in U.S. retail gas prices. In the past, however, consumers have been relatively quick to adjust to higher gas prices which has usually led to a fast recovery in visits to staple retailers – often at the expense of other discretionary categories. This may also explain the slight uptick in retail visits the week of March 14th. As gas prices continue to fluctuate, we will continue to monitor visitation trends for changes in consumer behavior. One potential impact is a return to mission driven shopping trends that buoy retailers with a wider array of goods driving larger basket sizes during longer visits at the expense of absolute visit numbers.
Gas Station Visitation Trends
For additional context, we’ve also examined gas station visitation trends. According to our Nationwide Gas Station Index, which includes almost 50,000 gas station chains across the United States, overall visits to gas stations have also decreased over the past several weeks. While continued work-and school-from-home trends may nullify some of the impacts of higher gas prices, the decrease in gas station foot traffic may also have implications in terms of broader consumer spending patterns.
First, rising gas prices could cause consumers to consolidate their shopping trips, which would favor superstores and large-format grocers and may even bring a return of mission-driven shopping behaviors. Second, as consumers become more selective with their shopping trips and consciously limit their gas expenditures, trade areas may start to shrink. Many retailers saw their trade areas expand over COVID even as their overall visit numbers fell due to an increase in unique visitors. Retailers that have invested in their omnichannel capabilities – thereby saving consumers shopping trips – and digital marketing functionality such as mobile ordering and personalized marketing efforts stand to retain a number of visitors acquired during COVID.
Costco Positioned to Benefit
While gas price inflation can negatively impact retail visitation trends, not everyone stands to lose – low-cost gas options tend to benefit when gas prices rise quickly. Costco, which operates almost 640 gas stations in North America, has long had a reputation for having the cheapest gas in the retail category. Foot traffic data indicates that Costco Gasoline bucked the trend and saw a meaningful acceleration in year-over-year visitation trends this past week. As elevated gas prices drive consumers to consolidate their shopping trips and turn towards one-stop-shops, Costco seems well positioned to benefit twice from the current situation.
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