The Challenge
The Outcome
Dive into the data to see how superstores are faring in an economically challenging period and see what lies ahead for Walmart, Costco, and Target in the second half of 2023.
Read White PaperAmericans have an enduring love for all things big – from our drinks and meals to our cars and stores. And perhaps nothing is bigger than superstores, with retail powerhouses Walmart, Costco, and Target serving as major shopping destinations for tens of millions of U.S. consumers. These retail giants, which boast a massive nationwide footprint offer everything from groceries to apparel and household furnishings.
This white paper leverages location intelligence to analyze the performance of the three brands. Using foot traffic metrics, cross-shopping trends, and visitor demographics, the report explores how Walmart, Costco, and Target have weathered the challenges of the past few years and identifies shifts in consumer behavior. How has the visit share across the chains changed, and what's driving that change? How do the three brands' differing target markets affect their competitors? What does the growing interest in health centers at these stores signify? This white paper explores the ever-evolving landscape of superstore shopping and the factors that drive consumer choices.
Retail has felt the impact of a challenging few years, with 2022 marked by inflation and high gas prices. But in the evolving retail landscape, challenges can quickly turn into opportunities, and Q2 2023 data indicates that shifting consumer trends may be helping superstores come out on top.
Already in H1 2023, Costco and Target outperformed the wider retail sector on a year-over-year (YoY) basis, posting visit growth of 1.2% and 3.1%, respectively, compared to a 0.3% dip for overall retail. Walmart, however, seemed more impacted by inflation – perhaps due to its visitors’ lower median HHI relative to Costco and Target shoppers – and the brand’s foot traffic was 0.9% lower than in H1 2022. But more recent weekly visit data suggest that a rebound is taking place, with the chain posting YoY weekly visit growth between June 19th and July 24th – indicating that Walmart is positioned for YoY growth in H2.
Although Costco and Target saw greater YoY growth in H1 2023, Walmart remains the largest retailer in the United States and the undisputed leader of the superstore sector, with the brand receiving the majority of superstore visits in H1 2023. But looking at visit share data from the past few years indicates that small but meaningful shifts have taken place.
Between H1 2019 and H1 2023, Walmart’s visit share shrunk from 55.2% to 50.6%, while Costco’s and Target’s grew from 9.8% to 10.3% and from 16.8% to 18.7%, respectively. The share of visits to the Discount & Dollar Store category also increased from 18.2% 20.4%. This redistribution of visits suggests that, while Walmart and its massive store fleet still dominate the segment, other brands have been increasingly carving out a larger piece of the retail pie for themselves.
The shift in visit share can be partially attributed to changes in store counts. From 2019 to 2023, Target added 115 stores, while Walmart reduced its store count from 4,769 to 4,684 in the same period. Discount & Dollar stores, which increased their visit share from 18.2% in H1 2019 to 20.4% in 2023, also expanded their retail footprint over the past few years. And Costco recently opened its 585th store, up from 552 in 2020.
While none of the other brands match Walmart's extensive retail presence, their expansion indicates a possible move towards a similar approach of brick-and-mortar ubiquity. But it is also important to note that – even though Walmart’s competitors have expanded and Walmart has condensed its store fleet – over half of H1 2023 superstore visits nationwide went to Walmart. So while the expansions of Costco, Target, and Discount & Dollar stores have shifted the visit share slightly over the past four years, Walmart has maintained its position at the top of the superstore category.
Analyzing the distinct audience profiles for each chain highlights how Walmart, Costco, and Target are reaching different visitor segments. The three chains have similar median household incomes (HHIs) across their potential markets (defined as the population residing in its trade area, weighted to reflect the number of households in each Census Block Group comprising the trade area). This indicates that there are not necessarily major differences between the income of households residing near these brands.
But captured market data – which is weighted according to the actual visitors to each chain – shows that despite the similarities in the brands’ potential market, Walmart, Costco, Target still attract different types of visitors. Households in Costco's captured market have the highest median HHI – perhaps because shopping at Costco requires an upfront membership cost as well as space at home to store bulky purchases. And households in Walmart’s captured market have the lowest median HHI, perhaps thanks to the brand’s focus on low prices. Meanwhile, Target sits in between the two, pointing to its broad appeal and popularity among wide swaths of the population.
Visitors to Walmart, Costco, and Target also tend to have distinct shopping preferences outside these chains as can be seen through the different cross-shopping patterns. For example, Costco shoppers show an affinity for off-price apparel retailers, while Walmart’s clientele embraces the discount hunt at stores like Dollar General and Family Dollar. And Target shoppers tend to frequent beauty destinations like Ulta and Bath & Body Works at higher rates than visitors to the other two chains.
These preferences tend to overlap with each brand’s offerings – for example, Target is well known for its beauty section, and Walmart is a bargain hunter's dream.
Looking at regional visitation patterns among Walmart, Costco, and Target also reveals both similarities and differences. In terms of similarities, all three chains experienced year-over-year (YoY) growth in the Northeast, and – to a lesser extent – the Midwest. Walmart saw a 3.4% YoY increase in visits in the Northeast during the first half of 2023, and Costco and Target saw growth rates of 4.8% and 5.9%, respectively, for the same period. In the Midwest, visits showed a more moderate increase, with 0.6%, 4.2%, and 3.3% YoY increase for Walmart, Costco, and Target, respectively. The strong growth across all chains may be tied to the relatively lower rates of inflation seen in the Midwest and Northeast – the YoY CPI increase stood at 2.4% in the Midwest and 2.2% in the Northeast in June 2023, below the overall countrywide increase of 3.0%.
In other parts of the country, performance was more varied. Target saw strong visits in the West, experiencing a 3.6% YoY increase in foot traffic, while YoY visits to Walmart and Costco dipped in those areas. Walmart also faced challenges in the South and Southeast, with a 2.9% YoY drop in visits to the region, while the other two chains both saw growth of 1.2%.
Understanding the regional differences in visitation patterns can offer these retail giants the opportunity to explore strategies tailored across diverse markets.
As brick-and-mortar retail maintains its dominance as the primary sales channel for most shoppers, retail giants have been exploring new ways to drive more visits to their physical stores. Some chains have focused on experiential shopping options, and others, like Walmart, are experimenting with design. The chain – known for its warehouse-style layout – recently revamped five of its Supercenters with brighter lights, wider aisles, vibrant displays, and an expanded selection of apparel and home goods, all aimed at appealing to a broader customer base.
Walmart piloted the new design in Arkansas before expanding to five Northeastern locations – and initial traffic metrics appear promising. H1 2023 visits to the five revamped Supercenters grew by 7.2% YoY, while nationwide visits fell by 0.9% for the same period. And the stores are not only seeing more visitors – comparing the median dwell time at the Supercenters and at typical Walmart stores nationwide suggests that the visitors that are coming to these locations are also staying longer.
By keeping its retail approach fresh and expanding the rollout of the new format, Walmart may be able to sustain and expand its appeal in an ever-evolving market.
Target has also been enthusiastically experimenting with different formats – the company operates over 200 Super Targets, along with over 150 small-format locations. And now, Target is debuting a new concept – Larger-Format stores, which are slightly smaller than Super Target venues, but include a larger selection of food and beverages along with more space for back storage and fulfillment relative to a typical Target store.
And customers seem to be embracing both shopping options. Visits to small-format stores outperformed both Super Targets and Targets nationwide on a YoY basis, reinforcing the idea that in retail, sometimes less is more. The success of these smaller, strategic stores hints at the significance of curating the shopping experience to meet customers where they are and provide the experience they need.
But while many shoppers appear to favor the small-format venues, the data also indicates that some consumers are willing to travel further to shop at a larger Target. Location intelligence for the first Larger-Format Target, a 145,000-square-foot store in Katy, TX, shows that the Larger Format venue draws visitors from a much larger trade area – and these visitors also stay longer in the store.
The Larger-Format Target’s massive trade area and higher median dwell time suggests that people are excited to visit – and explore – these larger-format stores, and highlights the many ways through which retailers can win at the foot traffic game. With construction on a new Larger-Format Target set to begin in the fall, it looks like the company feels confident in the store’s potential to continue drawing customers through the doors.
These retail giants focus on offering more than a convenient, one-stop-shopping experience – both Target and Walmart have also been at the forefront of in-store healthcare services. Target has maintained a long-standing agreement with CVS, and Walmart Health has gained momentum as a significant healthcare provider since its launch in 2019.
The visitation patterns from H1 2023 highlight just how strong that demand is – Walmart and Target locations that offer health services experience a higher average number of visits per venue than the statewide average for each chain. And now, the healthcare provider space is becoming ever-more crowded – major retailers like Best Buy, Walgreens, and Dollar General are launching their own initiatives. And Walmart, recognizing that demand for affordable healthcare is only growing, plans to double the number of clinics it operates by 2024.
The rise of retail healthcare helps retailers and consumers by driving additional foot traffic while serving as a one-stop-shop for consumers. As these retail giants continue to advance the healthcare landscape, consumers seeking out accessible in-store healthcare stand to be the real winners.
Combining retail visits with doctor's appointments is just one form of the mission-driven shopping that is now making a comeback. During the beginning of the COVID-19 pandemic, shoppers displayed a preference for making fewer visits to the store in a bid to minimize exposure to the virus. And these trends seem to have returned in H1 2023 as shoppers look for ways to cut down on gas costs and be more focused with their spending.
Comparing the YoY change in visit frequency to the change in median dwell time highlights this shift – visit frequency has dropped across all chains while median dwell time has increased. The trend was particularly pronounced at Costco, which specializes in bulk shopping – the chain saw the largest decrease in YoY visit frequency, which dropped by 4.1%, and the highest increase in median dwell time YoY – 9.1%. As ongoing economic headwinds drive consumers to seek efficiency and cost-effectiveness in their shopping habits, mission-driven store visits may continue to reign supreme at major chains.
It's not just lower visit frequency and higher dwell times that point to an increase in mission-driven shopping – visitors to the three retail chains are also more likely to come from home than in 2022. In H1 2022, 45.8% of visitors to Walmart started their journey from home, and this share jumped to 49.6% in H1 2023. Similar patterns repeated among Costco and Target shoppers, suggesting that people are making fewer spontaneous trips, and more shoppers are planning their trips deliberately.
Retailers that align themselves with this shift, perhaps by offering more incentives for buying in bulk or introducing weekly discounts, may become the discerning consumer's go-to shopping destination.
Walmart, Costco, and Target have found ways to thrive in a changing retail landscape. The three companies are keeping visitors coming back by adapting to shifting shopping patterns, experimenting with new store formats, and homing in on their target audiences. By staying in tune with consumer preferences, these retail giants can hope for continued foot traffic success.
The median HHI of visitors to Walmart, Costco, and Target differs, showing that while many of the retailers' trade areas overlap, each store has its own dedicated customer base and room for continued growth.
In H1 2023, YoY visits to Walmart, Costco, and Target grew in both the Midwest and the Northeast, suggesting that those regions may be ripe for additional expansion plans.
Walmart and Target have been experimenting with their store formats. Target has both large and small-format stores, while Walmart is revamping the design and layout of some of its venues so every shopper can find a store to match their preferences. Initial results indicate that these new formats provide significant advantages and can be leveraged to create more diversified fleets maximizing adaptability and potential reach.
With more people than ever seeking out affordable healthcare options, Walmart’s health clinics are heeding the call. The chain hopes to manage about 80 clinics by 2024. Health is already helping to drive ongoing visits and could become an even more strategic initiative should the initial success continue.
While inflation has eased, consumers are still feeling the effects of rising prices and are shifting their shopping patterns accordingly – visit frequency to stores is down, but shoppers are staying for longer. The ongoing adjustment of these patterns is a key trend to track in the second half of 2023.
