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Walmart’s had an eventful 2022, but the retail behemoth is in a better place than some of its competitors, like Target, because of its grocery business.
Consumers have eased spending on discretionary items and general merchandise, shifting their dollars to groceries and essentials, and leaving Walmart backed up with excess inventory, Ken Fenyo, president of research and advisory at Coresight Research, told Retail Brew. But mid- to high-income earners spending more on groceries gives Walmart a leg up.
“Inflation is both real but also psychological,” Fenyo said. “Even for wealthier households who might not necessarily be struggling paycheck to paycheck, I do think inflation causes real psychological pain as you see the prices for what you buy every week going up.”
While the world’s largest retailer beat Wall Street’s expectations—bringing in $152.86 billion in revenue and boosting sales more than 8% on a YoY basis—Walmart anticipates spending patterns to continue. CEO Doug McMillon put on an optimistic face as he said the demand for general merchandise will tick up with the help of back-to-school shopping.
- “Our fall and holiday products look great,” McMillon told analysts. “There’s a lot of newnesses, and we’ve got a strong position in opening price points across categories. From Halloween to Christmas to Flipkart’s Big Billion Days, we’ll be ready.”
Walmart hopes to move more of that product through Walmart+, its new subscription service that offers Walmart customers benefits both in-store and online—like its recent deal to bundle with Paramount+. Neil Saunders, managing director at GlobalData Retail, previously told Retail Brew that such a move makes sense, but will hardly move the needle.
Fenyo agrees, saying the robustness of the offering will be a challenge. “They are going to have to create that perception that this is a program that gives me a lot of value, at least 50% or so above what I’m paying, or else I’m just going to cancel.”
And whether this will draw in a more high-net-worth clientele, well, that’s anyone’s guess.
+1: DoorDash recently ended its four-year delivery partnership with Walmart, which is looking to build out its internal delivery platform. Also, Walmart announced last week that it will partially expand abortion coverage and related travel benefits for employees.—KM