Traditional Retail Council

Value continues to be the top consideration among consumers when deciding where and how to shop. Our retail market research has pointed to Walmart and dollar stores as the largest market share gainers YTD given their broad assortment of essential items and compelling price points relative to food retail peers. Feedback suggests the conventional grocery channel and Target have been most susceptible to share pressure in 2023 as both attempt to compete directly with Walmart in an inflationary environment. Target’s exposure to discretionary demand presents an especially unique challenge with consumers looking to cut back on non-essential purchases and stretching budgets.

Our retail industry insights suggest that magnitude and frequency of price increases has moderated in recent periods, as cost pressures tied to transportation, raw materials, and labor have stabilized. Most suppliers expect to see a broad gap between dollar sales growth and units persist through mid-summer. At this point, many CPGs may begin to lap the majority of price increases taken in 2022 and expect units to improve closer to flat. We believe consumer spending will remain focused on food/consumable categories over the near-term, and we continue to hear of examples of trading down and private label brands gaining traction in our recent work.

Manufacturers across categories should ensure they are well-versed with in-store and online capabilities for their customers and prioritize opportunities with retailers looking to drive omnichannel growth. Our retail market research indicates that Walmart has appeared incrementally focused on broadening assortment across its 3P marketplace and scaling micro-fulfillment centers (MFCs) over time to improve inventory availability, reduce order substitutions, and lessen aisle congestion for in-store shoppers. Given Target’s focus on Drive Up/Pick Up, suppliers have developed strategies to communicate flex fulfillment capabilities in banner ads and in PDP content.

Walmart appears to have the most momentum over the medium/long term given the company’s price leadership and market share gains post-COVID, leverage with suppliers, and investments in automation and digital capabilities. Dollar channel retailers will likely benefit from sustained inflation and any worsening in consumer discretionary spend. That said, we will need to monitor for continued improvements in Dollar General’s supply chain execution and any price adjustments needed to stay competitive with peers. Feedback on Family Dollar has become increasingly more positive year-to-date given changes in leadership and price/promotional investments. The club channel appears likely to remain a good absolute value play, especially among high-income consumers. However, there appears to be some slowing across discretionary and big-ticket items in this channel near-term. According to retail industry insights we’ve surfaced, the conventional grocery channel will likely see share pressure over time as consumer preferences continue to focus on value.