My article for the Kogod School of Business
According to Numerator, a white woman between the ages of 55 and 64 years old, married and living in the Southeastern suburbs of the US, is the “typical” US Walmart shopper. This shopper likely has an undergraduate degree and earns about $80,000 annually. She visits Walmart about once per week and picks up roughly 13 products for a total cost of under $60 per trip. This shopper spends about 13.5 percent of her income at Walmart and another 11 percent on Amazon.
The typical Walmart shopper primarily buys groceries, including chicken, fruit, snacks, and sweets, but she supplements her groceries with fast food meals. Her favorite five brands at Walmart are Turkey Knob, Cheetos, Betty Crocker, Dole, and Tyson.
With the price of goods continuously creeping up, consumer behavior has been surprisingly adaptive in response. During times of inflation, it’s expected that consumers will switch to cheaper alternatives and stop spending on items deemed non-essential. More surprising, however, is that higher-income households are on this tightening-of-belts pursuit of value to quite a similar degree as their lower-earning counterparts. In a CNBC report, Walmart CFO John David Rainey said the company is attracting more middle- and high-income shoppers. Seventy-five percent of the company’s market share gains came from customers with an annual household income of $100,000 or more. He told CNBC that inflation-strapped shoppers are trading down in quality and quantity.
So, what does this mean? The Morning Brew defines trading down as the phenomenon when consumers who are facing tough times swap high-priced items for cheaper versions. A similar trend occurred during the 2009-2011 economic downturn. The ratio of high-quality to low-quality goods shifts as recessions ebb. This is also a time when consumers start paying more attention to value, which Kogod professor Ron Hill describes as the idea of how much one must give up to get a specific good.
In addition to its convenience and low prices, Walmart’s recent investments in its digital capabilities are possible lures for upper and middle-class shoppers. Professor Hill suggests that another reason is that the pandemic eroded store loyalty.
People became used to uncertainty about what products they would find in the stores, so loyalty went out the window in favor of finding the best deal—or finding the item at all.”
“Plus, there may also be a ‘kitschiness’ factor at play where it may be kind of cool and quirky for someone who can afford to shop elsewhere to shop at Walmart,” says Hill.
Of course, Hill notes, the best strategy during inflationary times is to look widely for needed items to get the best value. Comparing prices online and planning your list ahead of shopping can offer the most significant time and money savings. And look to the experts like Professor Hill whenever you can for tips and tricks that you may not have tried yet to beat inflation woes!