Jun 22, 2019 - Economy

The fight for wealthy shoppers

Illustration of a hand covered in jewelry holding a computer icon shopping bag

Illustration: Sarah Grillo/Axios

For much of its existence, Walmart — with its "Save money. Live better." slogan — has catered to lower-income consumers, consistently offering the cheapest prices.

Now, as its rivalry Amazon intensifies, the retail giant is going after a wholly new cohort: the wealthy shoppers in superstar cities who traditionally shop on Amazon.

The big picture: Over the last two decades, Walmart and Amazon have carved out their own territories. Walmart reigns over redder, more rural and lower-income America, while Amazon commands the larger, liberal metros. Along the way, both have trod on the other's turf. But now they are stepping up their bloody fight for market share.

  • As we've reported, Amazon — along with other retailers — is attempting to loosen Walmart's viselike grip on low-income shoppers with discounted Prime memberships and pilot programs that accept SNAP benefits for grocery delivery.
  • But at the same time, Walmart has been encroaching on Amazon's territory — younger, wealthier, largely urban shoppers.
    • 82% of households making more than $112,000 per year subscribe to Prime, according to investment bank Piper Jaffray.
    • Only 23% of Prime members live in rural areas, and the most active buyers are 22–39 years old, per market research firm Gartner L2.

Neither Walmart nor Amazon responded to emails seeking comment. But Walmart sees the affluent market as essential to its growth: The potential for Walmart in discount retail is beginning to disappear as the field gets more crowded and its consumer base suffers from the one-two punch of stagnating wages and likely tariffs on common consumer goods, says Nelson Lichtenstein, editor of "Walmart: The Face of Twenty-First-Century Capitalism."

So, over the past few years Walmart has acquired Jet.com to bolster its e-commerce business, plus fashion brands like Bonobos and ModCloth that have gained popularity among the same consumers who are loyal to Amazon.

  • It modernized its website and plastered the New York City subway with well-designed ads for Jet that more closely resemble marketing products from hip, millennial brands like Away and Glossier than Walmart's classic look.
  • And just last month, it debuted JetBlack, a new membership service. At $50 a month — nearly four times Prime's monthly $12.99 cost — you get access to a personal shopper whom you can text to order from Walmart, Jet, Saks, Pottery Barn and other retailers.
  • The investments appear to have paid off. Walmart's e-commerce business grew by 40% in 2018, per earnings reports.

But, but, but: This is a tough battle, and it's not clear who is winning. Neither Walmart nor Amazon break down their sales in a way that reveals this market.

But in one suggestive peek behind the curtain, Walmart e-commerce boss Marc Lore said two-thirds of Jetblack members spend $1,500 monthly. He did not reveal the size of the user base.

In another clue, Walmart’s curbside grocery pickup business is booming and will account for 33% of the giant's digital revenue by 2020, Cowen and Company projects.

  • "Most grocery pickup shoppers, in general, are affluent, busy, young professionals often with children," writes Grocery Dive's Krishna Thacker, citing market research firm Numerator.
  • "By acquiring new brands and by using its website to showcase more premium products, Walmart has started to gain more traction with wealthier shoppers," says Neil Saunders of GlobalData Retail.
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