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Walmart’s Pivot

Walmart’s Pivot

Walmart’s most recent earnings release highlighted both the strategic changes that Walmart has made to address rapid change in retail as well as the positive impact these changes are having on financial results.

As we look at the various moves Walmart has taken it is helpful to understand the customer pivot that Walmart is undertaking.  There are three areas that Magid’s Retail Pulse customer survey reveals that are worth mentioning to see how Walmart’s strategy is addressing different customer sets.

Youth Focus – Similar to how 20 somethings pushed the early success of iPhones (and the rest of us followed), those under the age of 38 (yes, millennials) are driving change in retail today.  While only 41% of Walmart’s core customer fit within this age segment, well over 60% of Jet.com’s customers fall within this <38 segment.  Walmart will utilize Jet.com, Bonobos, Moosejaw, etc. to continue to appeal to younger shoppers knowing that a better understanding of these customers’ needs will benefit Walmart as a whole.

Higher End Income – For many years, Walmart was content to focus on the <$75K income segment since the >$75K income segment was fragmented and relatively inefficient to address in a profitable manner.  Only 30% of Walmart’s customers make over >$75K.  Costco and Sam’s Club (both of whom have over 40% of their customers coming from the >$75K segment) initially paved the way into more efficient sales to high income categories, and Amazon and Jet have both continued this movement in the digital space.  As higher income channels become accessible and more visible to mainstream income customers, it becomes easier for these customers to aspire to higher end brands.  Walmart understands this trend and wants its customers to have the option of brands like ModCloth and Lord and Taylor.

Multi Store Experience – 45% of consumer shops at four or more stores on a regular basis, and while this number is rapidly increasing across the board it is even higher for millennials with 54% of the <38-year-old segment shopping at four or more stores.  While spreading our purchases across multiple stores seems contrary to the overall trend of convenience, customers are in fact engaging with a greater number of retailers due to the desire for choice in conjunction with the ease at which one can explore various retailer options.  Case in point – 65% of Amazon’s core customers report that that they regularly shop four or more stores.  These customers should be able to get everything they want in Amazon without going outside of the Amazon ecosystem, yet they are in fact shopping elsewhere, and at a higher rate than their non-Amazon peers.  Walmart understands this desire for choice and is adding brands to its portfolio to bring these options to the broader Walmart customer.  Walmart has, by design, left these brands intact to make this choice, and the vastly different options these choices offer, apparent.

As Walmart continues to evolve its ability to address the needs of younger and wealthier customers as well as provide more options to customers demanding choice, it will be interesting to see how brands looking to work with Walmart adjust their approaches to best address these changes.

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