Competitive Impact of Lower Prices at Whole Foods

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Amazon Increases Pressure on Brick-and-Mortar

On August 28, 2017, Amazon closed a deal to acquire Whole Foods and immediately implemented price reductions to attract a broader customer base. After waiting for three weeks of live mobile phone location data, we used the Thasos Platform to quantify the competitive impact of the price reduction.

Our analysis covers a broad range of metrics–including new customer growth, attribution, loyal customer defection from competitors, and customer demographics–for customers of Aldi, Costco, Kroger, Publix, Safeway, Sam’s Club, Sprouts, Stop & Shop, Target, Trader Joe’s, Walmart, and Whole Foods.

Key Conclusions

  • Foot traffic to Whole Foods increased 17% year-over-year during the week of the price reduction beginning on August 28.
  • As of the week ending September 16, foot traffic decelerated to 4% year-over-year, but remained elevated relative to the three weeks preceding August 28.
  • The largest percentages of Whole Foods’ new customers during the week of the price reduction were regular customers of the following competing stores:
    • Walmart:                 24%
    • Kroger:                    16%
    • Costco:                    15%
  • Controlling for the size of each competitor’s regular customer base, the following stores experienced the highest rates of customer defection to Whole Foods:
    • Trader Joe’s:         10%
    • Sprouts:                     8%
    • Target:                        3%
  • Customer Defection Rates remained elevated for all competing stores as of September 16.
  • The new customers Whole Foods attracted with its price reduction were the wealthiest
    regular customers of the competing stores.
  • The price reduction did not attract a lower income demographic or incentivize longer driving times to reach Whole Foods’ stores.
Posted October 3, 2017

Q2 2017 Mall REIT Foot Traffic Report

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Mall REITs Face Declining Foot Traffic

Based on the largest repository of high quality mobile phone location data after Google and Apple, our AI platform enables for the very first time visibility into foot traffic at malls with nearly 100% coverage.

During the earnings reporting cycle for the first quarter of 2017 (“1Q17”), for our clients in advance of scheduled quarterly earnings releases, we accurately predicted negative year-over-year (“YoY”) foot traffic trends at mall anchor stores, including Macy’s, Nordstrom, Dillard’s, and Sears. To quantify our accuracy level, the YoY growth in same-store transactions or same-store sales reported by mall anchors matched our predictions based on foot traffic to within 0.7% on average.

Unlike the anchor stores located on mall REIT properties, many of the REITs themselves do not have a means of counting the people who visit every individual mall they own. Instead, such REITs use people counters for a sample of malls as an indication of performance for their malls nationwide. In at least one case, a REIT appeared to use a sample of one mall to answer questions about foot traffic trends across all properties. During the 1Q17 earnings reporting cycle, in stark contrast to the mall anchor stores located on their properties, many mall REITs reported or suggested that YoY growth in foot traffic across their mall properties was positive. Our data does not support such conclusions.

Key Conclusions

  • Most REITs operating malls classified as high quality Class A by Green Street Advisors have negative YoY foot traffic on a rolling quarterly basis through May 2017:
    • Simon Property Group (SPG):         -5.4%
    • General Growth Partners (GGP):    -5.7%
    • Taubman Centers (TCO):                    -6.2%
  • High-tech stores such as Apple, Microsoft, and Tesla have no effect in preventing declining traffic.
  • Malls with destination restaurants such as Cheesecake Factory and P.F. Chang’s underperform by 3.5%.
  • Malls with high-end department store anchors such as Nordstrom and Macy’s underperform by 3%.
  • Malls and strip centers with grocery stores and consumer staples outperform by 5%.
Posted July 26, 2017

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