Walmart's Plan for Serving Wealthy Urban Shoppers: Stores You Can't Go Into

WMT

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Key Takeaways

• Walmart may open "dark format" stores in urban areas as a way to fulfill e-commerce orders closer to high-income customers, CFO John David Rainey said.

• Meanwhile, one of the company's best-selling Black Friday items was Apple AirPods.

The wealthy have migrated to Walmart. Now the retailer wants to reciprocate.

Walmart (WMT) would like to build a presence in urban areas that's closer to parts of the well-off population that has started shopping with it in recent years. The traditional store format developed by the company has historically not translated well to cities, CFO John David Rainey said at a conference Tuesday, so Walmart is weighing "measured and responsible" ways to make the move.

"Certainly with a more affluent customer base that's coming to Walmart now, there's an opportunity to serve [them] in maybe more of a dark store format, where you don't have customers going into stores, but we can serve them through eCommerce," Rainey said, according to a transcript made available by AlphaSense. "We're experimenting with that, and the early returns are encouraging."

Walmart didn't respond to questions from Investopedia in time for publication. A summer report form USA Today discussed how the "dark stores," which aren't open to tye public, can speed delivery of some online orders.

Why This News Matters to You

Walmarts aren't fixtures in many dense urban environments, but as the company's customer base has grown wealthier it sees opportunity in trying to better serve its urban clientele.

Consumers with six-figure salaries began shopping with Walmart en masse as the company built up a delivery operation. Company executives have credited this population with driving much of Walmart's recent growth.

On Black Friday "one of the top selling items was AirPods, which ... maybe is more attractive to the more affluent customer," Rainey said, according to the transcript. "It's indicative of how Walmart is changing, and how our customer base is changing."

Walmart's highest-profile attempt at urban expansion was arguably in 2012, when it sought to open in a Brooklyn real estate development, a space that ultimately went to ShopRite, The Wall Street Journal reported. Walmart then scaled back its expansion plans as mayoral candidates took issue with Walmart's wages, non-unionized workforce and potential to squeeze supermarkets, The New York Times said.

Ordering groceries online has since become common thanks to companies like FreshDirect, Instacart (CART) and—outside of New York City—Walmart. Amazon (AMZN) trucks and delivery teams have become a common sight on city streets. And Target (TGT)—another brand with roots in suburban big-box stores—has several shops in New York City. Some even include escalators, a feature Walmart veterans once considered fatal, Rainey said.

"If a store has an escalator in it, it's probably not a really good store," Rainey said, according to the transcript. "There's a certain format that works for Walmart that lends itself to more rural areas."

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