- In the first quarter of 2023, Target experienced an increase in consumer traffic, but average spend per customer decreased.
- Sales were flat compared to the prior year due to inflation and changing consumer trends.
- Demand for essential products held up, but non-essential and discretionary purchases were affected.
Target saw an increase in consumer traffic in the first quarter of 2023. This includes growth in the number of transactions. However, consumer trends show that the average spend of each customer decreased at the same rate.
Thus, US retailer sales were flat compared to the same period in 2022, according to the data of the financial report published this Wednesday, May 17.
According to the report, shoppers are spending less on each purchase, especially on non-essential and discretionary items, due to inflation that does not subside (as in most of the world) and interest rates that continue to rise.
This phenomenon has a particularly impact on Target, which obtains a lower proportion of its income from the sale of essential products, such as food and household items, compared to other chains, such as Walmart, for example.
He target financial report of the first quarter of 2023 (ended on April 29).
Inflation and consumer trends
Inflation especially impacts the entire retail sector from changes in consumer behavior and purchasing decisions.
When purchasing power falls due to inflation (since wages don’t keep up with that price increase), consumers tend to take a more cautious approach to their spending.
This change in mindset directly impacts the sales performance of various product categories.
For example, with reduced purchasing power, consumers are more likely to reduce discretionary purchases such as luxury fashion items, high-end electronics, and premium cosmetics.
These non-essential products typically experience decreased sales during periods of inflation.
Major purchases, such as cars and real estate, are also particularly sensitive to inflation.
On the other hand, despite inflationary pressures, sales of essential goods and consumer staples generally experience sustained or increased demand.
Products such as groceries, personal care items, and household necessities remain essential to daily life and are less susceptible to changes in consumer behavior in times of inflation.
Another effect in retail is a shift towards “private labels” or “white labels”. As prices for top-brand products rise, consumers often turn to alternatives of comparable quality at lower cost.
Retailers with strong private label offerings may see an increase in sales and market share.
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