Walmart Targets the High-End Customer Again

MarketsMotley Fool

Over the last few years, Walmart (NYSE: WMT) has been steadily remaking its image. The company has lifted wages and improved training, mitigating a long-standing reputation as an abusive employer. It's also embraced renewable energy and LGBT rights, surprisingly aligning itself with progressive values.

As a business, Walmart has also made other moves to expand beyond its traditional rural, Southern base. It acquired Jet.com in 2016, in part to get access to a brand popular with young urban millennials and also to gain the services of Jet.com founder Marc Lore, who had earlier started Diapers.com-parent Quidsi, which Walmart lost in a bidding war to Amazon.com (NASDAQ: AMZN). The retail giant followed up the Jet.com acquisition by taking over several other online retailers, including Modcloth and Bonobos, with an eye toward selling those brands on the Jet.com platform.

Continue Reading Below

The high-end customer has long been an opportunity for Walmart as the company's discount stores have historically focused on low- to middle-income consumers and, with a reputation for value rather than quality, it has struggled to court wealthier customers. However, its ownership of Jet.com gives it an opportunity to correct that, and Walmart is now launching a new service, called Jetblack, targeting affluent New York City shoppers.

What is Jetblack?

Helmed by Rent the Runway co-founder Jenny Fleiss, whom Walmart hired last year to run the new platform, Jetblack describes itself in job listings as a "members-only personal shopping and concierge service that combines the convenience of e-commerce with the customized attention of a personal assistant," according to Recode. The service, which is currently being beta-tested, offers free delivery for household items in 24 hours and other items in two days. With its personalization and concierge services, the program seems to borrow from brands like Rent the Runway and Bonobos, which offer styling services. That category has emerged as a clear growth area in apparel retail, as the successful IPO of Stitch Fix and the launch of Nordstrom Local indicate. Such services are popular because they can help customers save time and find a better fit.

A big opportunity

For Walmart, the initiative is its latest attempt to grab a hold of a market that's long eluded it. The retailer has essentially been locked out of the NYC market due in part to political resistance, and it still has no stores in the nation's largest city. Walmart has made a play for New Yorkers through Jet, but gaining business from high-end customers is an even bigger opportunity.

As of 2016, the average Walmart shopper had an annual household income of $56,482, according to Kantar Retail, which was $13,000 less than that of Target's average customer. It was also less than the incomes of shoppers on Amazon at $62,900, Amazon Prime at $69,300, and Costco at $77,400. All other things being equal, wealthier shoppers are more desirable since they have more money to spend, so it makes sense for Walmart to target the demographic.

While Walmart itself may be too closely associated with cheap merchandise for that brand to tap a higher-end demographic, Walmart's supply chain, scale, and infrastructure should give initiatives like Jetblack an advantage, especially as the company has tapped some of retail's brightest minds like Fleiss, Lore, and Bonobos founder Andy Dunn, who now oversees Walmart's digital brands.

Brick-and-mortar retailers like Walmart are realizing that in order to remain successful, they need to expand beyond their traditional confines. Macy's (NYSE: M), for example, pulled a similar move when it acquired the New York concept store, Story, and brought founder Rachel Shechtman on board as its new brand experience officer, who is expected to revamp the company's approach to brick-and-mortar retail.

As Walmart remakes its international portfolio with the sale of its U.K. subsidiary, Asda, and the recent acquisition of a majority stake in Flipkart, the Indian e-commerce leader, it's also making big moves at home, both with the core Walmart brand as it expands programs like grocery pickup and delivery, and its digital brands like Jet.com and Jetblack, which evolved out Store No. 8 project, an innovation incubator that has also acquired a virtual-reality start-up and is working on an Amazon Go competitor under the name Project Kepler.

It's too soon to say whether Jetblack will be a success, but it's clear Walmart is moving in the right direction with such initiatives. The company may be the world's biggest by revenue, with more than $500 billion in sales, but as the high-end customer demographic shows, there are still plenty of growth opportunities on the horizon.

10 stocks we like better than Walmart Inc.When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Walmart Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of May 8, 2018

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Stitch Fix. The Motley Fool owns shares of and recommends Amazon. The Motley Fool owns shares of Stitch Fix. The Motley Fool recommends Costco Wholesale and Nordstrom. The Motley Fool has a disclosure policy.