Walmart is moving away from shoppers who were once its core customers as the middle class shrinks across the US.
In recent months, Walmart has purchased a number of trendy, online retailers, including hip fashion brand ModCloth, outdoor gear retailer Moosejaw, and shoe store ShoeBuy.
These brands’ wares are very different from the apparel stereotypically sold by Walmart, which is better known for its low prices than fashion innovation. ModCloth’s dresses typically cost from around $US60 to $US150; Walmart’s dresses are usually priced between $US10 and $US25.
“The acquisitions of ShoeBuy and Moosejaw, in addition to Hayneedle, gave us immediate expertise and capabilities in new, more upscale categories of merchandise,” Walmart CEO Doug McMillon said in a call with analysts in February.
The move towards more “upscale” merchandise demonstrates the changes that the discount retailer has been forced to make as the number of potential middle-class customers plummet. Between 2000 and 2014, middle-class populations decreased in 95% of the 229 metropolitan areas reviewed in a Pew Research Center study.
In an economically-divided America, Walmart has begun working to sell to two separate groups: shoppers looking for extreme discounts and upper-income shoppers seeking higher-quality items.
Walmart has been working to grow sales from more affluent customers for years, especially when it comes to e-commerce.
“The nature of e-commerce, the nature of the Neighbourhood Markets and other things we’re doing do create an opportunity for us to be even more relevant to customers that are at the higher end of the scale,” Walmart CEO Doug McMillon said at an investor meeting in October 2015, reported Fortune.
Walmart’s e-commerce sales have been spurred on by recent acquisitions, growing 29% in the most recent quarter compared to the same period last year. However, the retailer has a long way to go until it catches up with rival Amazon — especially as the e-commerce giant expands its own apparel offerings.
Amazon is predicted to exceed Macy’s as the biggest apparel seller in America this year. Prior to Walmart’s recent acquisitions of trendy ecommerce brands, Amazon similarly ventured into more high-end fashion, selling products by designers such as Zac Posen and Stuart Weitzman.
Walmart’s market value is now $US298 billion, compared to Amazon’s $US356 billion. In February, Warren Buffett’s Berkshire Hathaway sold off $US900 million of its Walmart stock, the last of Buffett’s shares in the company, after saying in 2016 that Amazon’s competitors had not figured out a way to counter the e-commerce company.
Business Insider Emails & Alerts
Site highlights each day to your inbox.