Retail

Walmart's grocery business is winning over more affluent shoppers

Key Points
  • Walmart's online grocery orders have been a major driver in its e-commerce business.
  • The company acquired Jet.com in 2016 to expand its reach to younger, urban and more affluent customers.
  • Proprietary brands acquired and launched in-house have also drawn new shoppers to Walmart.
An employee restocks frozen food products at a Walmart Inc. store in Burbank, California.
Patrick T. Fallon | Bloomberg | Getty Images

Walmart is reeling in higher-income customers — including some who are new to the retailer — with its online grocery business, company executives told investors Tuesday at an event in New York.

As its online grocery business grows, the company is seeing pricier items like choice cuts of meat and organic fruits and vegetables in customers' virtual baskets, said John Furner, president and chief executive officer of Walmart U.S.

He said the convenience of the service "aligns well with someone who is time-starved and has higher income levels."

The Bentonville, Arkansas-based retail giant has an expansive footprint across the U.S., but has tended to have stronger loyalty among shoppers in suburbs, small towns and rural areas. It bought Jet.com for $3.3 billion in 2016, with the hopes of winning over the e-commerce company's customers that tended to be younger, more affluent and urban. Jet.com has been wound down, but the company has bought other brands to expand its customer base — such as menswear company Bonobos.

Walmart offers online grocery pickup at about 3,200 stores and same-day grocery delivery at more than 1,600 stores, as of the fourth quarter. It's testing a new service called InHome that delivers groceries straight to customers' refrigerators. It is only available at some stores in Kansas City, Pittsburgh and Vero Beach, Florida.

Furman said Walmart's range of groceries, including prime beef and organics, has helped draw in different kinds of customers. Once they buy groceries, he said those new or more affluent customers may purchase an item in another department of the store or part of Walmart's website.

"Those quality levels then enable us to be able to appeal to that consumer across other channels," he said.

Walmart is attracting higher-income customers outside of groceries, too.

Marc Lore, president and chief executive officer of Walmart's U.S. e-commerce business, said first time Walmart customers are buying goods from the retailer's proprietary fashion and home brands.

Kathryn McLay, president and CEO of Sam's Club, said the membership-only retail warehouse store pivoted a few years ago to target customers with incomes of about $100,000 and larger families. "That's driving membership growth, and it's also driving traffic," she said.

Ahead of the investor day presentation, Walmart reported disappointing fourth-quarter earnings, which it attributed to lower demand for toys, video games and apparel over the holiday season. Walmart CEO Doug McMillon said he is looking for ways to gain further market share online for its apparel and home goods

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