Walmart\u00a0is known for its low prices and no frills approach.<\/p>\n
So it may come as a surprise that wealthier shoppers are helping to fuel the retailer\u2019s growth.<\/p>\n
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\u2019s market share gains in the fiscal third quarter, Walmart CEO Doug McMillon said on the company\u2019s earnings call in November.<\/p>\n
Those newer and more frequent customers have helped support the company\u2019s aspirations to sell more higher-margin items, such as clothing and home goods. They are driving Walmart\u2019s e-commerce sales, which have\u00a0grown by double digits\u00a0for 10 consecutive quarters. And they can boost the retailer\u2019s newer revenue streams, such as subscription-based membership program Walmart+ and its advertising business Walmart Connect.<\/p>\n
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\u2019s shares soar about 83% in the last year. Yet some investors have questioned whether Walmart\u2019s traction with affluent shoppers has staying power, especially if the sticker shock of inflation cools.<\/p>\n
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.<\/p>\n
This time, Furner said the gains will last because Walmart can save shoppers both time and money with e-commerce options.<\/p>\n
\u201cIt\u2019s different because we deliver to you at the curb [of the store],\u201d he said in the late January interview. \u201cWe deliver to your house. We deliver 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.<\/p>\n
Walmart\u2019s expanding digital services have helped convince higher-income shoppers to give it a shot, said Brad Thomas, a retail analyst and managing director at\u00a0KeyBanc\u00a0Capital 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\u00a0launched\u00a0about five years ago, is Walmart\u2019s answer to Amazon Prime.<\/p>\n
Walmart has not disclosed the program\u2019s membership count, but it has reported double-digit membership income growth in each of the past four quarters..<\/p>\n
Thomas said e-commerce options wipe out a potential hurdle for affluent shoppers: a potential stigma about shopping at the big-box stores themselves.<\/p>\n
\u201cThere\u2019s a customer in America that doesn\u2019t think of itself as a Walmart shopper,\u201d he said. \u201cThey 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.\u201d<\/p>\n
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\u2019s nearby stores, he said.<\/p>\n
Walmart\u2019s 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\u2019s Secret.<\/p>\n
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\u2019s marketplace.<\/p>\n
Yet as Walmart tries to keep those customers, it wants to encourage them to shop in person, as well. Walmart has stepped up investments in its stores to freshen its look and counter negative perceptions that higher-income shoppers might have.<\/p>\n
Walmart has sped up the pace of remodels for its more than 4,600 stores across the U.S., with plans to revamp about 650 locations per year, an acceleration from a prior cadence of 450 to 500 per year, said Hunter Hart, senior vice president of Walmart Realty.<\/p>\n
Remodeled stores\u00a0have brighter lighting, wider aisles and mannequins, said Alvis Washington, Walmart\u2019s vice president of retail brand experience. The stores also feature Walmart\u2019s newer and more fashion-forward brands like\u00a0Scoop and Free Assembly, and national brands that shoppers would recognize, such as Reebok.<\/p>\n
The discounter\u00a0launched a new grocery brand, BetterGoods, last year with colorful packaging and creative flavors that looks similar to merchandise that shoppers might find at Trader Joe\u2019s or\u00a0Target.<\/p>\n
The Walmart U.S. CEO Furner said some of those changes have drawn upper-income customers to the company\u2019s stores and app.<\/p>\n
He said Walmart\u2019s market share gains with affluent shoppers have come from online and in-store shopping, but added curbside pickup orders showed early signs of popularity with those customers. Even before the pandemic, Walmart saw that people who shopped with curbside pickup bought more higher-priced items, such as prime beef and seafood, Furner added.<\/p>\n
He said\u00a0<\/strong>that still rings true: Walmart sees more premium items in the shopping baskets of customers who buy online, get home deliveries or use curbside pickup.<\/p>\n Washington said Walmart treaded carefully with its store redesign, realizing it could risk its reputation for low prices and resonance with core customers, who typically have lower incomes. It promoted newer brands, but mixed in familiar staples, such as folded piles of inexpensive bath towels and denim.<\/p>\n \u201cHaving a great, elevated experience and great value aren\u2019t mutually exclusive,\u201d Walmart\u2019s Washington said, recounting the company\u2019s approach. \u201cSo when we looked at this, it\u2019s like, how do we do both and make sure we can gain new customers and maintain the customers that we have?<\/p>\n When comparing remodeled stores to the rest of the fleet, Washington said higher comparable store sales reflect that customers like the different look. Walmart declined to provide specific numbers, saying it won\u2019t release sales numbers until it reports fourth-quarter earnings.<\/p>\n Walmart\u2019s customer mix for its U.S. e-commerce business hasn\u2019t changed, even as it attracts higher-income shoppers, according to an analysis by market research firm Euromonitor. About 34% of Walmart\u2019s online customers in the U.S. last year had incomes of $100,000 and above, which is roughly flat compared to two years prior.<\/p>\n Michelle Evans, global lead for retail and digital shopper insights at Euromonitor, said that indicates that Walmart is also gaining market share from lower- and middle-income customers.<\/p>\n Walmart still has a smaller share of higher-income shoppers than some key rivals: 49% and 48% of online U.S.\u00a0<\/strong>shoppers at Target and Amazon, respectively, have incomes above $100,000.<\/p>\n Amazon remains a formidable competitor, especially when it comes to wealthier shoppers and general merchandise categories, Evans said. But Walmart\u2019s biggest edge is its grocery department.<\/p>\n