Foot Traffic Falls in Department Stores, Rises in Discounters, F&B

Department stores are the rare example of declining foot traffic by consumers in May, according to a report from Colliers.

These “middle-market” shoppers are migrating to value apparel channels like off-price, said the report, among the reasons why department stores saw their sales fall by 3% and foot traffic decrease by 2.8% over the year.

Nordstrom (down 11.48%) and Bloomingdale’s (down 7.79%) fell well below the national average (-2.84%) with Macy’s ticking fractionally higher.

99 Cents Only (up 18.49%) and Dollar Tree (+7.3%) led the discounters.

Overall, retail fundamentals improved in May. Foot traffic increased by 6.6%, and sales grew by 0.3% over April.

Discounters saw a 3.4% increase in foot traffic as the Memorial Day holiday offered discounts and bargains while helping to stimulate retail spending in May, Colliers said.

Consumers continue to enjoy eating out as they helped mark a third consecutive month of sales gains.

“Services spending remained buoyant,” Colliers wrote, “while quick-service restaurants remain appealing to consumers as the leaders in average visits.”

In-and-Out Burger was an outperformer, up 12.38%, and Chick-fil-A dropped by 3.2%.

The Modern Rule for Retail Design

Sean Slater, Principal at RDC, tells GlobeSt.com that while shoppers have been back to brick-and-mortar for over a year, shopping habits have changed – probably forever.

“Value centers are booming due to department stores’ failure to capture online traffic during the pandemic, and their customer’s expectations are very different from a Nordstrom or Macy’s shopper,” Slater said.

“They are tired of high-low pricing and ‘chasing the sale’ when they can have immediate savings and walk out happy.”

For larger shopping centers and open-air centers, foot traffic should be decoupled from sales, he said.

The modern rule for retail design is: “Get ‘em here, make ‘em happy, keep ‘em on site as long as you can!” Slater said.

“Whether it’s casual food and beverage or apparel and accessories, customers are attracted to a property through features beyond the products – programming, quality open space, and diverse offerings are the key ways to bring customers into brick-and-mortar retail.

“Retailers, now more than ever, are being compelled to amenitize their spaces to drive foot traffic – once shoppers are in-store, the longer they linger, the more likely they are to make purchases.”

Edie Weintraub, founder, terra alma, tells GlobeSt.com, “Across its Southeast footprint, terra alma sees strong success in food halls where people can order what they want and still come together as a group.

“Fast casual and counter service is slow to return due to lack of return to the office. Strong dinner sales in restaurants are also evident.”

No Let-Up in Food & Beverage

Brandon Svec, national director of U.S. retail analytics at CoStar Group, tells GlobeSt.com that recent foot traffic figures support the continuation that consumers are seeking out value, rotating away from discretionary purchases (especially durable goods), and increasing spending in restaurants and bars.

“Nearly 20% of new leases signed over the past year were from tenants in the food and beverage sector,” Svec said, “and based on recent foot traffic figures, the strength in the sector looks set to continue for at least a little longer.”

He said one thing to watch however will be how consumers react to student loan payments resuming in the fall.

“Expectations are that we will see a much more negative impact on foot traffic and spending at restaurants and bars than discounters,” he said.

Wayne Williams, director of retail marketing at Lewis Retail Centers, tells GlobeSt.com that while the first quarter experienced sluggish foot traffic, with a nearly 5% decline, largely attributed to an extended winter and heavy rainfall in Southern California, there’s been a notable improvement in the subsequent months.

“Our open-air portfolio of grocery-anchored shopping centers has seen a significant surge in foot traffic during drier periods,” Williams said. “In the transition from April to May alone, we observed a noteworthy increase of 4.5% in foot traffic, indicating a positive trend.”

Retail ‘Continuing’ Post-COVID Rebound

Jeff Mooallem, COO, Urban Edge Properties, tells GlobeSt.com that he has not seen a negative impact on traffic and sales or demand for space in our properties.

“Retail is continuing its strong post-Covid rebound with no signs of slowing down, driven by a lack of supply of premium locations in dense markets and a steady demand from consumers,” he said.

“Our shopping centers are experiencing increased foot traffic and tenants are reporting healthy sales volumes, leading to an appetite for more locations. The fundamentals of retail leasing are the best we have seen in many years.”

Jason Baker, principal, Baker Katz and Executive Director, X Team Retail Advisors, tells GlobeSt.com that while the Colliers report offers some positive insights, its report might be “a little misleading” after taking inflation into account.

“No doubt, it’s half of what it was even six months ago, but in general, I still don’t believe we’re out of the woods,” Baker said.

“Memorial Day for almost every category of retail, has been a big spending holiday. There certainly is a large percentage of people who are choosing to not vacation this summer and are, instead, willing to spend more shopping and eating out.

“Expect to see rock-solid food and beverage figures for the remainder of the summer months and softening soft goods sales as we get closer to the end of the year.”