In a sign of the changing landscape of American consumer behavior, even the well-heeled are heading to Walmart in search of value.
Once seen primarily as the go-to retailer for budget-conscious families, Walmart is now reaping the benefits of attracting more affluent shoppers, a demographic that has played a pivotal role in the company’s recent surge.
Walmart reported another stellar quarter, with a 4.8% increase in revenue compared to the previous year, bringing the total to an impressive $169.3 billion. The company’s second-quarter sales growth of 4.2% exceeded analysts’ expectations, leading Walmart to revise its guidance upward for the remainder of the year. The retail giant now anticipates annual sales growth between 3.75% and 4.75% for 2024, up from its previous estimate of 3% to 4%.
The company’s success flies in the face of concerns that American consumers are cutting back. During the earnings call on Thursday, Walmart CEO Doug McMillon emphasized that shoppers from all income levels are turning to Walmart in increasing numbers. “We’re also seeing higher engagement across income cohorts, with upper-income households continuing to account for the majority of gains, even while we grow sales and share among middle- and lower-income households,” McMillon stated.
This trend isn’t just confined to Walmart’s grocery aisles. The company has seen growth across its health and wellness category and Sam’s Club memberships, indicating that higher-income consumers are becoming a key component of Walmart’s customer base. This shift is part of a broader pattern observed earlier in the year, where more affluent consumers were driving Walmart’s sales growth.
The retail giant has been particularly well-positioned to capitalize on the current economic environment. With inflation easing slightly and the job market showing signs of slowing, consumers are more cautious about their spending. They are steering clear of big-ticket discretionary items and instead focusing on necessities like groceries and everyday household goods—categories where Walmart excels.
Walmart’s private-label brand, Bettergoods, has been at the forefront of this growth. Launched earlier this year, the brand features eye-catching packaging and a range of plant-based and premium products designed to attract health-conscious, higher-income shoppers. According to market research firm YouGov, these affluent consumers are more likely to consider Walmart for their grocery needs than other retailers like Whole Foods and Trader Joe’s.
The surge in online shopping has also played a significant role in Walmart’s recent success. Higher-income customers, in particular, are taking advantage of Walmart’s e-commerce offerings. In the latest quarter, Walmart’s global e-commerce business grew by 21%, with weekly active online customers increasing by 20%. Store-fulfilled deliveries skyrocketed by 50%, as Walmart’s promise of speedy delivery times—ranging from one to three hours—proved to be a significant draw for these consumers.
However, Walmart’s success story isn’t without its challenges. As former Walmart U.S. CEO Bill Simon noted in a May interview on CNBC’s Fast Money, even wealthy shoppers are susceptible to economic pressures. “When money is tight, people react—even high-end consumers react,” Simon said, highlighting the potential volatility in consumer behavior.
Indeed, other discount retailers are noticing similar trends. Dollar General CEO Todd Vasos remarked in June that wealthier shoppers are increasingly gravitating towards bargain brands. This shift indicates a broader cautiousness among consumers, even those with more disposable income, as they navigate where to save and where to spend.
While affluent customers are currently helping to drive Walmart’s growth, retaining this demographic may prove challenging in the long term. Simon suggested that as economic conditions improve, these consumers may shift their loyalty back to more premium shopping experiences. Although Walmart has made strides in enhancing its stores, offering appealing own-brand products, and providing convenient shopping options, the retailer may find it difficult to maintain its appeal to wealthier shoppers once the economic storm passes.
“As the economic challenges abate…service will become more important than convenience and price,” Simon predicted. “And we’ll see a shift back of some of the consumers.”
For now, Walmart’s ability to attract a broad spectrum of shoppers—from budget-conscious families to affluent consumers—has solidified its position as America’s retail leader. But the road ahead may require continued adaptation to keep these valuable customers coming back.
