Since its inception, Walmart has been a beacon for the bargain shopper. But now the retailer known for its low prices is appealing to a new demographic: customers who make more than $100,000 per year.
Walmart, the world’s largest retailer, reported a strong third quarter—and its chief financial officer in part credits this new customer base for the boost. Sales came in just under $170 billion, in-store sales increased 5.3%, foot traffic jumped 3%—but the big difference was in e-commerce sales, which leapt 22%.
“We had a really strong quarter," Walmart CFO John David Rainey told Yahoo Finance, adding the company saw gains in all product categories and income cohorts. About 75% of its share gains came from households making more than $100,000 per year, Rainey said, a demographic typically associated with shopping at Amazon and Target.
Walmart notes two aspects of the company that are "helping create that intrinsic pull" from higher-income customers, a spokesperson told Fortune. One is convenience; as Walmart offers delivery and pick-up options for customers "in just a way no other retailer" does, the spokesperson said. Another boon for Walmart has been increasing the number of items it offers for sale, the spokesperson said, which "bring in customers that may have not shopped us before."
This is a continuation of a trend Walmart CEO Doug McMillon highlighted last quarter.
“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 said in Walmart’s earnings call in August.
Walmart has mastered the dupe
While Walmart has long been heralded for its super-low prices, it’s also become a haven for “dupe” shoppers. Dupes are essentially just cheaper versions of expensive products that appear to be nearly identical. Some dupes don’t live up to the quality of aspirational or luxury brands, but others get the job done at a lower price point without sacrificing too much comfort.
“Walmart’s shift isn't just about cheaper prices; it's about redefining 'value' to include quality that wealthier customers can't ignore,” Kaveh Vahdat, founder and president of fractional CMO services company RiseOpp, told Fortune. They've blended premium products with their hallmark affordability, making it socially acceptable for higher-income shoppers to say, 'I got this at Walmart.'”
Even more than being "socially acceptable" to shop at Walmart, the spokesperson said the company has observed customers being proud to have shopped at the discount retailer.
"No matter what your budget may be, we have something to offer," the Walmart spokesperson said. "That can make people feel really proud of what they're putting on their table food wise, or wearing apparel wise, or the makeup that they're buying, from a beauty perspective."
Some of what Walmart has done best in the world of dupes are home goods. Social media influencers share their best finds at the discount retailer that look nearly identical to aspirational brands like Pottery Barn and Crate & Barrel. Take the Edgewood Chair, for example, which retails at Pottery Barn for a whopping $1,049. At Walmart, you can snag a lookalike for just $139, one TikTok user shared.
“To attract wealthier clients, Walmart also introduced some premium product lines, such as their new premium home brand Bettergoods,” Greg Zakowicz, a senior e-commerce expert at marketing automation platform Omnisend, told Fortune. Bettergoods is where customers find many of the dupes of more expensive brands. “In recent years they’ve also invested heavily into remodeling their stores, upgrading lighting, and putting more of an emphasis on high-end products on their shelves.”
The Walmart spokesperson added that the company's apparel department has also been successful, highlighting Walmart's collaboration with fashion designer Brandon Maxwell. One specific example of a popular Walmart dupe has been the Scoop jackets and coats, which retail for about $60. They're dupes of Max Mara apparel, which sell for thousands of dollars.
"These items look pretty incredible, and they're really, really well priced," the Walmart spokesperson said.
Is Walmart edging out Target?
Walmart and Target are both known for their superstore appeal, where you can buy anything from clothing to groceries to home goods. But Target typically appeals to a slightly wealthier demographic, with its prices a little more expensive than Walmart.
But now that Walmart has seen a growing shopper demographic of people who make more than $100,000 per year, it begs the question of how it’s differentiating itself from Target—and whether Target should be worried.
“While Walmart has made significant gains among wealthier shoppers, it is not necessarily edging out Target,” Zakowicz said. “Walmart’s core business still lies in low-income households, so unless they change their strategy entirely—this shouldn't change.”
Plus, experts said Walmart’s appeal of low prices is still enough to differentiate it from Target, especially in an inflationary period.
Walmart succeeding with the wealthy is the “perfect storm of economic anxiety and strategic transformation,” Vahdat said. “When even the affluent want ‘smart spending,’ Walmart’s expanded offerings position it as both practical and surprisingly desirable.”
To be sure, Target is also performing well financially, seeing second-quarter sales grow 2%, and is expected to report third-quarter results on Wednesday, thanks to growth in a couple sales categories.
"We also saw improving trends across our discretionary categories, most notably in apparel, and we're seeing continued strength in beauty,” Brian Cornell, chair and CEO of Target Corp. said in a statement announcing the company’s second-quarter earnings.
Retail and e-commerce experts also said these are the categories where Target outperforms Walmart, including apparel and beauty.
“Target has invested heavily in creating stylish, high-quality apparel that appeals to fashion-conscious shoppers, whereas Walmart’s clothing section, while improving, isn’t yet a direct competitor,” Mario Sarceno, founder of Founders PR, told Fortune.
Target didn’t immediately respond to a request for comment from Fortune.
