Walmart ‘bubble’ warning as wealthier customers proving a risk
Inflation has been impacting American families negatively prompting many to seek lower priced groceries at discount stores like Walmart. But will they stay?
Households in the United States, like those in many other nations, have been contending with inflation hitting their pocket books. To make budgets stretch further, many families have sought out cheaper priced groceries at discount supermarkets like Walmart.
America’s largest retailer has seen substantial growth in the number of people shopping at their stores across all income groups. Of the three demographic tiers they track, those from the upper-income group, who make more than $100,000, was “notably, one of the biggest contributors” according to Walmart CFO John David Rainey.
He sees those gains not just from affluent shoppers trading down, but because of Walmart’s focus on “convenience.” However, former Walmart US CEO Bill Simon, speaking to CNBC Fast Money, warned that as inflation decreases those wealthy customers may not stay.
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Walmart ‘bubble’ warning as wealthier customers proving a risk
Walmart gaining more high-income customers during “an economic challenge” is nothing new says Simon. The “tailwinds” that inflation has provided to draw in shoppers looking for lower prices will reverse in the future as inflation cools he predicts.
“Walmart is built on convenience, cost and assortment, not on service,” explained the Arkansas-based retailer’s former CEO. “The Walmart experience is better than it used to be but it’s still not a premium experience.”
That said, “it’s a different company with its digital capabilities they have,” he noted. “It’ll be really interesting to see this time how many stay and how many leave.”
Walmart’s e-commerce business has surged, up 22% in the first quarter of this year. The “digital bridge” will be key to maintaining the affluent customers in the future according to Walmart’s former executive.
“If customers have to go to the physical box to get the savings, I think they’re going to move,” Simon predicts. “If Walmart can deliver a seamless experience digitally to them, many of them will likely stay.”