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US inflation forces high income groups to shop at Walmart for food

06:59 17 August 2022 Author :  

US inflation at a four-decade high has hit low-income Americans the hardest. 

On Tuesday, Walmart's results showed that those with bigger wallets are getting squeezed too while its low income customers swapped out deli meats for less expensive hot dogs and canned tuna.

The nation's largest retailer, which offers wide ranging discount deals, said it saw more middle and high income customers shop at Walmart during the second quarter. A shift in consumer patterns, Walmart said, has been different from previous economic downturns.

"In Walmart's US business, we have seen mid-to-high income customers come to Walmart looking for value. As you would expect, food and consumables, in particular, are places where they're looking to save some money," Walmart's Chief Executive Officer Doug McMillon said.

This has boosted sales for Walmart in the second quarter, the company reported on Tuesday, but the downward shift at almost all points along the social spectrum cut into profit margins.

And the same forces shaping choices that Americans make about where they shop for food and what they eat are forcing Walmart to cut prices and clear huge inventories of things that customers clamoured for during the pandemic; TVs, casual clothing, sporting goods and a host of other items not considered essential.

Retailers this year have had to stay on top of shopping habits which have been affected by both rising costs and consumer who would rather spend money outside of the home rather than on it as the pandemic eases.

The Bentonville, Arkansas-based retailer said the company grew market share in the grocery segment during the second quarter ended July 31. Roughly 75 percent of its market share in grocery sales, during the latest quarter, was driven by shoppers with $100,000 or more in annual household income.

The company did not provide additional details on its market share gains.

Competitive online groceries market

Most of these sales came through its US e-commerce platform, which grew 12 percent during the quarter, and helped the retailer post better-than-expected sales and lift its full-year profit forecast.

In the United States, Walmart's online grocery market share, which includes pickup and delivery services, rose to 55 percent in June from 52 percent in March.

In contrast, online grocery delivery platform Instacart's share dropped to 27 percent from 28 percent Amazon's declined to 7 percent from 8 percent and Kroger’s fell from 9 percent to 8 percent during the same period, data from research firm YipitData shows.

Target's online delivery service Shipt also lost market share during the period, the data showed.

Getting Walmart without going to Walmart 

The attraction to Walmart during this period of economic stress is different compared to the financial recession of 2008-09 when it had a smaller e-commerce business and didn't offer many of its current services, Walmart's US Chief Executive John Furner said on an investor call.

In-store pickup, delivery from stores and its Walmart InHome business –– a service that provides delivery of groceries right to a shopper's refrigerator –– were key in attracting the high income consumer, he said.

Furner also attributed some of the new customer growth to the nearly two-year-old Walmart+ membership programme.

Priced at $98 annually versus Amazon's $139 annual Prime subscription, Walmart+ offers incentives including unlimited free deliveries on orders over $35 and discounts at gas stations.

CFO Rainey said the retailer is "more relevant" to a wider group of people after it started allowing third-party sellers to offer products on Walmart.com.

This added millions of products to its website – from 10 million five years ago to more than 240 million now. "As we add new product ...we are becoming more relevant to a wider group of people, " Rainey said.

 

Source: agencies

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