Wealthier Shoppers Are Patronizing Lower-Cost Stores

“In a period marked by economic uncertainty, understanding which audience segments remain willing to spend – and which are looking to cut back – can be crucial for consumer-facing companies,” argues a white paper by the location analytics company Placer.ai.

This is especially true at a time of inflation when some shoppers may choose to switch from their usual brands to lower-cost alternatives.

To make its point, the paper analyzes data from two national retailers, Target and Ulta. It concludes that each company has successfully managed to attract wealthier shoppers with incomes above $150,000 while holding on to its broader client base.

The paper does this by scrutinizing each company’s “potential” and “captured” market.

“A chain’s potential market includes the population that lives in the chain’s trade areas, while the captured market reveals the demographic and psychographic characteristics of the audiences that visit the chain in practice,” the paper states. 

Examining the data on Target, Placer.ai finds the chain is attracting a larger-than-expected share of higher-income households when both the captured and potential market are accounted for.  Households earning over $150,000 a year make up 17.8% of Target’s potential market – but 19.6% of its captured market. The paper acknowledges the increase could be due to the migration of wealthier households to suburban markets.

Realizing that financially stable individuals recognize the value of mid-retailers like Target can help retailers, CPG managers, and even dining industry stakeholders tailor their product offerings and market their budget-friendly options to a higher-income customer segment, the paper suggests.

Ulta, a beauty-products chain that houses mass and prestige brands under one roof, has seen its foot-traffic trends hold up in the challenging economic environment. The share of households with a median annual household income of $150,000 is larger in Ulta’s captured market than its potential market, the paper notes. However, this varies with location. Stores in New Jersey have a higher share of the well-to-do in their captured markets relative to their potential markets, while there is less variance in their California and Illinois stores.

These examples demonstrate that understanding trade area data can help stores remain relevant in a changing marketplace, the paper concludes.