How Retail “Shrink” is Shrinking Target’s Foot Traffic and Leading to Store Closures
October 12, 2023
Earlier this year, foot traffic to Target stores soared to 32% above the levels of the previous year, marking the most substantial increase among its major competitors. The heightened foot traffic brought not only an influx of in-person shoppers but, unfortunately, an increase in theft and organized retail crime at certain Target stores. This surge in criminal activities has caused unsafe environments for both staff and customers. Additionally, it has likely driven up costs associated with theft, damage, and fraud, commonly referred to as “shrink” costs. As a result, the retail giant has made the decision to close nine of its stores in major cities across four states.
How has theft and crime affected consumer Target’s foot traffic in the cities with store closures, and how might this have impacted business performance at these stores? To gain deeper insight into Target’s store closure strategy, we examined consumer foot traffic to Target stores in the cities affected by closures, compared to foot traffic at all other Target locations.
Foot Traffic to Target Stores Amid Growing Theft and Store Closures
We examined year-over-year foot traffic to Target locations in the major cities seeing store closures, which are New York, Portland, San Francisco, and Seattle. From Q2 2022 to Q2 2023, foot traffic to Target stores in these four cities overall, compared to all other Target stores, was drastically lower. Foot traffic as a whole to Target stores in the cities affected by closures decreased by 4% year-over-year. In contrast, foot traffic to all other Target locations increased significantly by 25% year-over-year.
During Q4 2022, foot traffic to Target stores outside of the four cities with store closures skyrocketed to a 36% increase, compared to Q2 2022. Meanwhile, foot traffic to Target stores in the four cities with store closures increased as well in Q4, but not as dramatically. This may have been due to increased theft, pushing Target customers to visit competing stores or shop online to avoid feeling unsafe while shopping in-person. This would make sense, as theft-related crimes usually increase during the holiday season each year, suggesting that heightened concern over theft-related crime may have started impacting certain Target locations around this time.
So how does this data break down between each city being impacted by store closures?
Target Stores in New York, Portland, San Francisco, and Seattle
To learn even more, we examined foot traffic to Target stores in each city with store closures separately, comparing the results to foot traffic to all other Target locations. San Francisco Target stores saw the greatest decline in consumer foot traffic in the last year, with a 23% decrease. Meanwhile, foot traffic to New York Target stores declined by 15%, and Seattle Target stores saw a 6% decrease. On the other hand, Portland Target stores showcased the strongest performance in this category, boasting a significant year-over-year increase of 43%. Even though Portland stores saw significant growth in consumer foot traffic, there are other factors at play that would warrant store closures in this major city, along with the other closures.
Target’s 2023 Store Closures
It is understandable for Target to close stores with low foot traffic and high theft rates in San Francisco, New York City, and Seattle, given that they are likely causing financial losses for the company. However, the decision to close stores in Portland, where foot traffic has increased dramatically, might seem unclear.
Some stores in Portland may be significantly outperforming others, resulting in higher foot traffic on average for the Portland area. Alternatively, certain stores in Portland, despite experiencing increased foot traffic, could be struggling to generate enough profits due to rising theft and the accompanying security costs.
Keeping shoppers safe amid a rise in theft-related crimes comes at a cost to businesses like Target on top of the tens of billions of dollars that theft is costing major retailers today. So, despite the year-over-year increase in foot traffic at Portland Target stores, the combination of retail shrinkage due to theft and the higher costs of security to reduce losses and ensure a safe shopping experience likely contributed to Target’s decision to close stores in the city. As Target and other major retailers encourage harsher penalties for theft, time will tell if Target’s efforts make a difference and if foot traffic to Target stores in New York, Portland, San Francisco, and Seattle will improve.
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