Luxury Brands Should Consider Walmart.com to Grow Their Consumer Base

When people think of Walmart, certain associations spring to mind, mostly stemming from the discount retailer’s dedication to “everyday low prices,” serving middle- and lower-income consumers. Yet in recent years, Walmart has made attempts to capture the attention of more affluent consumers as well.

Walmart’s changing demographic

Since September 2016, Walmart has spent big bucks purchasing higher-end ecommerce platforms like ModCloth, Bonobos, Moosejaw, and, most notably, Jet.com. “Since, it has allowed Walmart to tap into a younger, more urban, and wealthier customer base. Each acquisition has also taught the 56-year-old big-box retailer new skills,” Retail Dive reported.

Walmart recently launched Walmart Fulfillment Services, as well as a plan to launch Walmart+, a subscription service to rival Amazon Prime. Many high-end brands and items such as Rolex watches, Louis Vuitton handbags, Chanel perfume, Alex and Ani jewelry, Gucci, Prada, and Tiffany & Co. are sold on the ecommerce platform through third-party sellers.

As of November 2019, it was reported Walmart.com hosted more than 32,000 sellers, with more than 41 million products for sale online, the majority of which are not sold directly by Walmart. Not only is this good news for customers who still are looking for the best price on items by visiting Walmart.com, it means high-end brands that traditionally might not appeal to customers who choose to shop at Walmart can grow their customer base because, on average, Walmart.com customers have higher incomes than in-store customers. John Furner, president and CEO of Walmart U.S.  said the convenience of the service “aligns well with someone who is time-starved and has higher income levels.”

All brands are expanding on Walmart, not just luxury

Experts say this is an important move for Walmart in order for the store to capture more of a market share in ecommerce, which at the end of last year was a $601.75 billion industry, and to stay competitive with Amazon, which has captured nearly 50% of the ecommerce market share. “Efforts to expand assortment have not just been limited to luxury brands, but all brands that are not on Walmart.com,” said Senior Brand Manager Cody Parrott of Pattern. “It just so happens that the majority of these ‘go-gets’ are luxury brands who decline partnerships with Walmart on the basis of a false perception that their brand image will suffer being associated with a retailer built around everyday low price. The reality is the premium customer does shop on Walmart.com, and luxury brands can find great success on the re-branded platform.”

Challenges on Walmart

For the most part it’s worked—Walmart saw an increase of 41% in ecommerce sales in Q3 2019—but only a 35% increase during the holiday season, leading to 2019 Q4 earnings that were lower than expected. Not all of its luxury brand acquisitions have paid off either. Walmart ended up selling off ModCloth last year, Bonobos laid off staff and Jet.com’s city grocery business and experimental shopping service also came to an end.

Currently, although Walmart continues to offer more competitive prices than Amazon, Amazon customers are loyal due to perks like Prime and same-day shipping. “I find it hard to believe Walmart will ultimately be able to pull loyal customers from Amazon without a market-shaking action,” Parrott. “I think the answer here is for Walmart to acquire the proper assortment, which would allow for new customer acquisition through everyday low price strategies employed by Walmart.”

Luxury brands can take advantage of the emerging marketplace

But unless Walmart introduces some “wildly innovative, new service” to their platform, Parrott doubts the company can take a huge bite out of customer loyalty to Amazon, which offers perks like Prime and same-day shipping. However, Parrott suggests this is actually good news for luxury brands when it comes to testing new business practices. “Luxury brands can test products, pricing strategies, segmentation, etc., with relatively low risk due to the lower revenue generated on Walmart.com,” Parrott said.

It might be a while before Walmart.com truly becomes a tough competitor for Amazon, and it may never happen—but that’s exactly why luxury and high-end brands should sell on Walmart.com. Not only can they test out new business strategies, like Parrott said, but these brands can grow a customer base among the people who aren’t married to Amazon, who don’t have a Prime subscription, or feel unsatisfied with prices offered.

Maybe Walmart.com won’t become the next Amazon—but there’s no reason Walmart.com customers can’t provide incremental revenue and sales for more luxury and high-end brands looking to diversify their sales and expand their brand footprint. Interested in selling on Walmart.com or other marketplaces? Contact Pattern’s Walmart experts.