4 Observations: Retail foot traffic as a proxy for holiday consumption

4 Observations: Retail foot traffic as a proxy for holiday consumption

Anecdotally, it makes sense that foot traffic is an indicator of consumption -- where there are people coming in the door, transactions are being conducted. This makes mobility data valuable in a variety of industries, retail especially, and no time of the year produces the same level of retail foot traffic data in the US as the holiday shopping season. 2021 is an especially interesting year as it is the harbinger of what the longer term COVID rebound may look like.  

When you combine location data with other datasets, such as financial market information, it’s possible to go a step further and begin correlating foot traffic with actual business performance. So, trailing foot traffic data can become a leading indicator of future revenue (one of many that investors look at). When you look at these correlations across different sectors and brands, certain trends and themes become clear.

So, with a bit of a tease on some new insights Unacast will unwrap for you in December, here are four observations that make us believe foot traffic is an excellent proxy for holiday consumption in the retail industry.

1. Foot traffic and revenue can be reliably correlated

In the coming weeks and months, we will release new research that demonstrates a strong correlation between foot traffic and quarterly revenues among publicly traded companies. In a nutshell, both foot traffic and dwell time, aka how long we stay in a given location or venue, have a distinct relationship to revenue for a number of brands.

This correlation is explicitly clear in some sectors; less so in others. We’re going to look at different industries and sectors where this correlation is the strongest and list specific brands where both R-Squared (strength of relationship) and P-value (significance of relationship) are at attractive levels.

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2. Visitation doesn’t tell the whole story of consumption

While feet in the door is a strong measure of consumption in some sectors - those most reliant on people ‘showing up’ to a particular venue - a series of consumer behavioral changes are clouding the picture. Restaurants and Fitness centers have the highest increase in foot traffic in 2021, when compared to 2019, while Clothing & Accessories and Home Goods are among the worst. Why? 

Supply chain issues have a lot to do with it, as do changing patterns in consumption. It’s not a coincidence that personal consumption expenditures (PCE) increased to $214.3 billion, or 1.3%, in October 2021 as foot traffic in some retail sectors also rose in the build-up to the holiday shopping season. At the same time, supply chain issues abound as the world still battles the COVID 19 pandemic, with the home goods, furniture, and chip-reliant sectors particularly impacted by delays from overseas manufacturers. Simply put, each sector and brand faces unique conditions and challenges. 

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3. Consumers remain loyal to favored brands

In our ‘brand versus brand’ series of posts in 2021, we examined the competitive landscape in different retail sectors, among them grocers, athletic apparel retailers, and shoe stores. To ring in the holiday season, we will revisit those case studies and refresh our Tableau workbooks with up-to-date data. In preparation, we have compared Black Friday holiday performance for each of an initial seven brands we’ll discuss: Athleta, lululemon, Nike, Puma, Adidas, Whole Foods and Trader Joe’s.

Long story short, the winning brands are usually still winning and in some cases building on their market share, often by proving to be more nimble in adapting to COVID-era markets and consumer behaviors. That said, smaller, regional players are elbowing their way to the top of the charts in some areas. The prevailing theme seems to be that the more personal the service, the closer to home we now stick in terms of the brands we trust, and how far we’ll go to reach them.

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4. Pockets of opportunity abound

COVID has reshaped every aspect of retail, from the supply chain, through the store front. That last mile warehouse on the edge of an urban area may no longer be sufficient to meet the rise in demand for home-delivery goods. This puts real estate in such areas at a premium and is pushing suppliers to find more efficient ways to cart, store and distribute goods. 

In a similar vein, as catchment areas ebb and flow in parallel with the COVID timeline, and urban populations continue to shift out to the suburbs and rural areas, the demand for stores, goods and services is changing, too. That neighborhood where it didn't make sense to have a store in 2019 may now be a boondoggle in the waiting. That showcase venue on the Upper East Side may now be a ghost town. That small county that sat idle for years may now be bursting at the seams with new residents and personal wealth. All of this goes towards understanding changes in consumption and human migration.

Looking ahead

For a long time, the market thought of foot traffic as descriptive: it told us what happened but not much about what to do next. As our datasets become increasingly more robust our platform is producing exponentially more information that, when linked to other data, can produce accurate insights with prescriptive drivers for forecasting and supply chain planning, as well as other retail use cases like site performance, competitive intelligence and site selection. The same data can be of tremendous value to investors when informing real estate acquisition or portfolio asset management.

Moving forward, we’re going to show you how location and mobility data are at once an excellent proxy for change in retail consumption patterns, and a powerful indicator for future consumption, financial performance, and supply change evolution. To learn more, please talktous@unacast.com

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