Affluent households key to Walmart's e-grocery performance

While lower-income households remain Walmart’s core online grocery customer segment, a growing base of affluent households played a vital role in driving Walmart’s strong growth through the first half of 2024 (1H24) due to higher order frequency and higher spending than other customer segments, according to the latest edition of "Profiling the Online Shopper: E-Grocery Purchase Patterns in the U.S."

The report, created by Brick Meets Click and sponsored by Mercatus, dives deep into users of four major formats and banners — supermarkets, Walmart, Target and hard discount — to analyze how household penetration, spending and order frequency for e-grocery have shifted between 1H24 and the same period in 2023, according to a news release.

Looking at the e-grocery customer mix across the four major formats and banners, Walmart’s mix (excluding Sam’s Club) continues to skew more heavily toward lower-income households than the other competitors, the release said. During 1H24, households making less than $50,000 annually accounted for 41% of Walmart’s average monthly active users compared to 36% for hard discount, 30% for supermarkets and 28% for Target. However, Walmart’s most affluent segment, households with $200,000 or more in annual income, expanded to 8%, growing almost five times faster than the 4% year-over-year growth for its overall annual monthly active user base.

“Walmart’s growth in households making $200,000[-plus] per year shows that the ‘flight to value’ has even affected how this income group shops for groceries,” said David Bishop, partner at Brick Meets Click. “Affluent households that shop online for groceries at Walmart spend 1.5 times more each month than households in the lowest income bracket, making them a very attractive customer segment to target and win over.”

Increased online penetration into the affluent household segment by Walmart has come at a time when lower-income households at many formats/banners are pulling back their online spending to varying degrees, the release said. The analysis, powered by data from the monthly Brick Meets Click/Mercatus Grocery Shopping Survey, found that for households making under $50,000 annually, Walmart’s sales dipped 6% and supermarkets and Target dropped 20%, respectively.

Walmart’s gains with affluent e-grocery shoppers also appear to have come at the expense of supermarkets, hard discount and Target, who each posted a decline in sales with this group, according to the release. In addition, Brick Meets Click said overall average order values declined at the formats and banners in the analysis except for Walmart. Walmart’s overall average order value held steady year over year due to mixed results across the income segments as its AOV for e-grocery orders placed by affluent shoppers surged more than 40% to $119 compared to last year while the AOV for its lowest-income users shrank by almost 6% to $84.

Overall e-grocery order frequency rates at Walmart increased slightly in 1H24, inching up by about half of a percentage point to 1.97 monthly orders versus 2023. Although order frequency dropped over 10% for households making $200,000 or more to 2.02 monthly orders, the combination of 2 or more orders per month and an AOV close to $120 shows the value of these affluent customers to Walmart’s e-grocery business, the release said.

In looking at where else Walmart’s customers chose to buy groceries online during the same month, supermarkets retained the top spot for cross-shopping, edging out Amazon’s pure-play services, according to the report. Approximately 1 in 6 (16.8%) of Walmart’s monthly active users also bought groceries online from a supermarket format within the same month during the 1H24, slipping 28 basis points versus the 2023 period. The dip in the overall cross-shop rate with supermarkets was entirely driven by less cross-shopping among Walmart’s least and most affluent households, signaling that Walmart may be capturing a greater share of wallet for these segments, the release said.

"Regional grocers risk losing more of the business that’s driven by affluent customers to Walmart if they don’t effectively address shifting expectations,” said Mark Fairhurst, chief growth officer for Mercatus. “To retain existing affluent shoppers and possibly attract others, grocers need to strengthen their value propositions by offering unique products, personalized promotions, exceptional service and enhanced digital experiences that elevate customer satisfaction."