Walmart, which describes itself as a retailer focused on saving people money, is enjoying a boost in online sales from a surprising contingent – higher-income shoppers. Households earning more than $100,000 made up 75% of the retailer’s market share gains during the third quarter.
For more than two years, Walmart has noticed more customers with six-figure incomes shopping at its stores and online, possibly driven by the sticker shock of skyrocketing inflation. Many shoppers, including wealthier consumers, realized they could get national brands from Walmart at a lower price and sometimes faster than from Amazon, according to a CNBC report.
The company has used this trend to justify selling more higher-margin items, such as clothing and home goods, and it is hoping these customers will boost new revenue streams, including its subscription-based membership program, said the report. Walmart has increased its third-party marketplace and recently began offering premium beauty products on its website. Some of these brands include Victoria’s Secret, Chanel and Louis Vuitton.
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Whether this traction with affluent shoppers has staying power is a question some investors are asking. In an interview with CNBC, Walmart U.S. CEO John Furner acknowledged the retailer has experienced a rise and fall of affluent customers before. During the Great Recession, wealthier shoppers sought out value at big-box retailers but ultimately returned to other retailers, he said.
Furner said he expects the gains will last this time thanks to the convenience of online shopping that can put goods in the hands of buyers within a couple of hours. Walmart’s subscription-based membership program, which has attracted some of its newer and more frequent customers, provides perks including free home delivery. One of the biggest hurdles to attracting affluent shoppers is overcoming the stigma of visiting big-box stores in person, which e-commerce options eliminate, the report said.
“There’s a customer in America that doesn’t think of itself as a Walmart shopper,” said retail analyst Brad Thomas, managing director at KeyBanc Capital Markets. “They think of themselves as a Target shopper or a Publix or a Whole Foods shopper and through the app and through delivery capabilities, they can remain a non-Walmart core shopper, but get all the benefits of getting the branded items at Walmart prices.”
Even before the pandemic, Walmart saw more premium items in the shopping baskets of customers who buy online, get home deliveries or use curbside pickup. Walmart would like to turn those customers into in-person shoppers. The company has invested in remodeling more than 4,600 brick-and-mortar stores to counter negative perceptions high-income shoppers might have, according to CNBC. Improvements include brighter lighting, wider aisles and mannequins. The company also launched a new grocery brand last year with packaging and creative flavors that mimic Trader Joe’s and Target.
However, the company has had to walk a fine line with its remodels to avoid alienating its core customers, who typically have lower incomes.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
