As Recession Moves In, Customers Move Out of Walmart and Target

In a report by Reuters on Thursday, many Walmart shoppers who moved to more local budget options like Dollar General or other dollar stores, as well as grocery chains like Aldi, when gas prices surged have not returned to Walmart.

Reuters report also said foot traffic fell an average of 2.7% at U.S. Walmart locations, which include 3,573 Supercenters and 370 discount stores, compared to the same time last year. Competing discount grocer Aldi saw foot traffic rise 11.5%, while Dollar General saw a 4.1% increase in foot traffic, as their convenient locations made them preferable for consumers looking to save money on gas.

According to Reuters, Walmart CEO Doug McMillon said that Walmart was an “inflation-fighter’ and a prime destination for shoppers during a recession. But, Walmart’s share as the first choice for groceries dropped nearly 2% from 27.4% to 25.5% in July.

McMillon told Reuters that low-income shoppers were buying fewer items despite the fact that they were consolidating trips over higher prices. CNN Business reported that Dollar General has widened its product selection to reflect an increase in sales from its core demographic of families making $40,000 or less per year.

Managing Director of the retail consulting firm Strategic Resource Group, Burt Flickinger, told Reuters “Walmart needs to up its advertising spending to entice customers with ‘high-value ads.’ Walmart should focus on local advertisements such as newspaper ads.

The Wall Street Journal (WSJ) reported that Walmart has been struggling in recent months with falling profits that led to the layoff of approximately 200 corporate workers in the last two weeks. Part of this struggle was tied to inventory problems, with products that were delayed and in high demand during the pandemic no longer seeing customer interest, leading to oversupply.

The WSJ also reported that citing people familiar, the layoff was part of a restructuring effort of Walmart’s corporate roles.

A senior portfolio manager at the Roosevelt Investment Group told Reuters, Walmart is not alone in the recent decline, with Target also seeing a decline in shoppers. While Walmart and Target may offer larger selections, dollar stores are often more convenient and closer to consumers.

Discount stores saw foot traffic increase 8% year-over-year in the second quarter of 2022, and we up 13.2% compared to the first quarter.

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