Costco, Walmart are appealing to wealthy shoppers

Retail giants Costco and Walmart are continuously attracting higher earners, due in large part to their product selections. 

The companies haven’t alienated their traditional customer base, but executives have touted how their product portfolios, from Rolex watches to Bose headphones, have continued to drive in wealthier shoppers. Walmart’s finance chief went as far as to say the company is a far cry from what customers have seen historically. 

A few things are driving this broader trend. For one, “there is less stigma around shopping at traditionally budget-friendly retailers because people recognize that quality and price don’t always correlate in the way they once believed,” psychotherapist and author Jonathan Alpert told FOX Business. “At the same time, economic uncertainty – even for higher earners – leads to more conscious spending.” 

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Alpert said shoppers want to “feel like they’re making smart financial decisions,” and that “getting premium products at a lower price provides a sense of financial control and security.” 

Retailers like Costco and Walmart are tapping into this, by diversifying offerings to include more high-end brands, luxury items and exclusive products.

In a recent interview, Costco Chairman Hamilton “Tony” James said a Porsche dealer in Seattle put their cars on the floor of one of the membership clubs, and the cars sold within a week. 

“Affluent people love a good deal,” James told Chief Executive Magazine.

He acknowledged that most of its members are “average-income earners,” but that “affluent members with two times the average income” allow the business to “do remarkable things.”

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“Since the beginning, we’ve always known we could move anything in volume if the quality was good and the price was great – Rolex watches, Dom Perignon, 10-karat diamonds,” James said. 

In December, Walmart CFO John David Rainey told FOX Business that the nation’s largest retailer has been “upleveling” its brand and enhancing the looks of stores, which he says has helped the company “appeal to a much broader demographic than what we have historically.” 

The changes are key factors behind its appeal to higher-income shoppers, who have been increasingly coming to its stores. 

Rainey credits part of Walmart’s success in attracting a wider range of shoppers, including more affluent customers, to expanding its product assortment, particularly in its e-commerce business. The addition of higher-end items, like Apple products or Bose headphones, which “are sought after by more affluent customers,” are some examples of this strategy, he said.

In its earnings call last week, the Arkansas-based retail giant said it continued to gain market share, especially from higher-income households, as it added more than 150 key brands to its assortment over the past fiscal year and remodeled 650 stores. It remodeled 100 locations within the past three months alone.