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Walmart is getting a bump from a surprising cohort: Wealthier shoppers

13
Oct

Walmart is known for its low prices and no frills approach. So it may come as a surprise that wealthier shoppers are helping to fuel the retailer’s growth. For more than two years, the discounter has noticed more customers with six-figure incomes shopping on its website and in its stores. Households earning more than $100,000 made up 75% of the company’s market share gains in the fiscal third quarter, Walmart CEO Doug McMillon said on the company’s earnings call in November. Those newer and more frequent customers have helped support the company’s aspirations to sell more higher-margin items, such as clothing and home goods. They are driving Walmart’s e-commerce sales, which have grown by double digits for 10 consecutive quarters. And they can boost the retailer’s newer revenue streams, such as subscription-based membership program Walmart+ and its advertising business Walmart Connect. As Walmart reports its latest earnings on Thursday, Wall Street will be watching whether those upper-income customers are sticking around, after market share gains helped the retailer’s shares soar about 83% in the last year. Yet some investors have questioned whether Walmart’s traction with affluent shoppers has staying power, especially if the sticker shock of inflation cools. In an interview with CNBC, Walmart U.S. CEO John Furner acknowledged that the retailer has gained and then lost upper-income customers before, such as in 2008 and 2009 during the Great Recession. Affluent shoppers stretched their dollars at the big-box retailer, but then ultimately returned to competitors. This time, Furner said the gains will last because Walmart can save shoppers both time and money with e-commerce options. “It’s different because we deliver to you at the curb [of the store],” he said in the late January interview. “We deliver to your house. We deliver to your refrigerator. That whole Supercenter, which is an amazing retail format, is available in an hour or two for a large part of the country and growing really quickly.” Delivering growth Walmart’s expanding digital services have helped convince higher-income shoppers to give it a shot, said Brad Thomas, a retail analyst and managing director at KeyBanc Capital Markets. Some of those newer or more frequent customers have joined Walmart+, a subscription-based membership program that includes perks like free home deliveries. Walmart+, which launched about five years ago, is Walmart’s answer to Amazon Prime. Walmart has not disclosed the program’s membership count, but it has reported double-digit membership income growth in each of the past four quarters. Thomas said e-commerce options wipe out a potential hurdle for affluent shoppers: a potential stigma about shopping at the big-box stores themselves. “There’s a customer in America that doesn’t think of itself as a Walmart shopper,” he said. “They think of themselves as a Target shopper or a Publix or a Whole Foods shopper and through the app and through the delivery capabilities, they can remain a non-Walmart core shopper, but get all the benefits of getting the branded items at Walmart prices.” As inflation forced shoppers of all incomes to hunt for deals, some wealthier consumers realized they can get the same national brands like Tide detergent or Bounty paper towels from Walmart cheaper and often faster than at Amazon because of Walmart’s nearby stores, he said. Walmart’s website and app have increased their selection, too, as the company has bulked up its third-party marketplace. Starting this summer, the company began offering premium beauty brands through its website, including hairdryers from T3 and perfumes from Victoria’s Secret. Shoppers can now find handbags from Chanel and Louis Vuitton, too. Last month, Walmart announced a deal with resale platform Rebag, which sells the items through Walmart’s marketplace.