Walmart and Target customers run through stores looking for bargains

Visitor dwell time, or the time they spend browsing the aisles to check off each item on a shopping list, has declined at Walmart and Target over the past year, according to an August report from software company Placer.ai, which tracks foot traffic. That suggests there is less goal-oriented shopping and that consumers are instead visiting individual retailers to find curated items and deals they know fit their budget, said RJ Hottovy, head of analytical research at Placer.ai. Assets.

“They probably know what they're looking for there,” he said. “They're probably just looking for certain deals, so they know what they want when they get in there.”

The trend reflects consumers' resignation to their economic situation. With inflation creeping since mid-2021, consumers' appetite for non-essential goods has waned, making them more focused on buying only essentials. To save money on basic goods, shoppers have turned to cheaper brands or opted for discount stores like Walmart and Target over the past year. Hottovy says consumers have developed new habits over the past year. They know where to find bargains, and they do so efficiently.

Costco is a notable exception here. According to Placer.ai data, the company is seeing consistent—and even higher—dwell time while discounters are seeing customer declines. Rather, it's a function of the retailer's strategy to keep customers engaged: changing store layouts, offering food samples, and promising a cheap meal in the form of a $1.50 hot dog at the end of a long shopping spree. This strategy has worked for the big-box chain, which reported a 9.1% year-over-year increase in sales in May.

The big winners

Shorter dwell times don't lead to lost sales. Both Target and Walmart have seized the opportunity to lure cash-strapped shoppers by lowering prices on thousands of items and launching private labels that appeal not only to bargain hunters but also to higher-income customers looking to save. This strategy has worked and is partly responsible for Walmart's continued strong profits and Target's recent sales that have exceeded all expectations.

“This [consumers] are extremely price sensitive in this environment,” Hottovy said. “And if you can give them a better deal – especially if you set prices lower than they were a year ago – consumers will definitely respond.”

But while Walmart and Target have been rewarded for their price cuts, they also face increasing competition from dollar stores that continue to attract middle- and lower-income consumers while the supermarkets benefit from the cheaper prices offered by wealthier consumers, Hottovy said. Placer.ai found that more Walmart, Target and Costco shoppers also visited Dollar Tree last quarter than a year ago, a trend that has continued even before the pandemic.

Dollar stores may be struggling during this time of economic uncertainty, when low-income customers are bearing the brunt of inflation, but they have also worked to appeal to these needy consumers. Dollar General has added grocery products to its lineup at over 5,000 locations, trying to compete for sales with Walmart and Target, which rely heavily on groceries to attract customers, generate sales, and drive traffic to stores. Others are moving and opening new locations to expand their presence in areas of higher demand.

As consumer shopping behavior has normalized and more retailers have the ability to lure consumers with special offers and low prices, both large chains and dollar stores have a chance to win big, Hottovy argued – even if inflation begins to cool.

“I think there will be more competition between the channels,” he said. “But there are enough people using both channels right now.”