For some three decades, Walmart has held onto the massive market of low-income U.S. consumers, fiercely defending this territory from newcomers — but threats to its dominance are piling up, Erica writes.
What's happening: Amazon is emerging as a substantial rival to Walmart in the fight for the estimated $624 billion-a-year market, joining other retailers and brands and betting that — as it has in so many industries — it can capture a large part of this much-overlooked cohort.
The big picture: With competition rife for affluent and mid-range retail customers, the low-end market is the new battleground for big merchants.
- At stake is a third of U.S. households — those earning $50,000 or less a year — 88% of whom visited a Walmart last year, according to a recent survey by GlobalData Retail.
- Since the 1980s, Walmart has come to dominate this sector of the consumer market with what so far has been an unbeatable strategy: Go to every town (the juggernaut has 5,362 locations and sits within 10 miles of 90% of Americans) and undercut everyone else's prices.
But now it's facing competition against both its footprint and its prices.
- Grocery's deep discounters like Aldi and Lidl from Europe have started to make a dent in Walmart's market share. Aldi has some 2,000 stores in 35 states, including in Walmart's hometown of Bentonville, Arkansas.
- "Aldi has built a cult-like following. ... The allure is all in the rock-bottom prices, which are so cheap that Aldi often beats Walmart at its own low-price game," CNN's Nathaniel Meyersohn reports.
- And the dollar giants are refusing to be left behind. To fight against Walmart's increasingly popular "buy online and pickup-in-store" model, Dollar General has developed an app that lets its shoppers do the same — capitalizing on its 15,500 U.S. locations.
Now Amazon, with its deep pockets and track record of disrupting industry upon industry, is entering the ring.
- The company is leaning into its strong suit, injecting high-tech delivery into the fight. It assumes that discount shoppers want the same speedy delivery it offers to all its other customers — a perk that this market segment has long been excluded from, says Fred Killingsworth, a former Amazon manager who runs a retail consultancy.
- Amazon has joined a New York pilot, along with Walmart and Shoprite, that lets food stamp (SNAP) beneficiaries buy groceries online. It also rolled out a discounted Prime membership at $5.99 a month — compared to the standard $119 per year — for those on SNAP or Medicaid.
- It's adding lockers around the country at places like Kohl's to give customers worried about packages being stolen from their stoops a place to pick up goods.
- It has launched a slew of private label products, ranging from sofas to button-downs to milk, at cheap prices to compete with Walmart brands like Great Value and Time and Tru.
But, but, but: While Amazon may be able to make a dent in apparel or appliance sales to less-affluent shoppers, the most lucrative business is grocery, and the e-commerce giant will have much more difficulty winning that game, experts say.
- "I think Amazon will have some impact but I don’t see it as being a major disrupter in this space," says Neil Saunders, managing director of GlobalData Retail.
Amazon and Walmart did not respond to requests for comment.