Walmart's latest strategy confirms the death of the American middle class as we know it
Walmart is getting into aspirational retail — and it says a lot about the American economy.
On Wednesday, Recode reported that the online cosmetics subscription service Birchbox had discussed a potential sale to Walmart.
Walmart has purchased several trendy online retailers in recent months, including the high-end men's retailer Bonobos, the hip fashion brand ModCloth, and the outdoor gear retailer Moosejaw. The gap between Walmart's more traditional offerings and its recently acquired trendy e-commerce brands shows that the retailer isn't simply boosting quality or slightly increasing prices. It's trying to attract a completely new market — an upper-middle-class or upper-class customer who buys Bonobos or Birchbox but may otherwise never consider shopping at Walmart.
These brands' wares are a marked departure from the apparel typically sold by the retail giant.
Walmart's reputation for selling inexpensive but unfashionable garb is so established that it was the sole retailer placed in the low-price, less-fashionable quadrant in a 2017 investor presentation by Ascena Retail, the parent company of Ann Taylor and Lane Bryant.
ModCloth's dresses cost $60 to $150, whereas Walmart's dresses are usually priced at $10 to $25. Similarly, Birchbox's best-sellers range between $20 and $30, according to the company's website, while most of Walmart's best-selling makeup costs less than $10.
The addition of upscale merchandise demonstrates the changes that the discount retailer has been forced to grapple with as the number of potential middle-class customers drops.
Pew Research Center defines "middle class" in America as households with two-thirds to double the national median income. While that still includes roughly half of American households, it's a shrinking group — from 2000 to 2014, middle-class populations decreased in 203 of the 229 metropolitan areas reviewed in a Pew study.
While the average household income for the wealthiest 20% of Americans grew by about 60% from 1980 to 2015, the rest of America has significantly lagged behind. The mean income of the lowest-earning 20% grew by just 10% in the same time period.
In an economically divided country, Walmart has tried to win over not only shoppers looking for extreme discounts but also shoppers with more money seeking higher-quality items.
"The nature of e-commerce, the nature of the Neighborhood Markets and other things we're doing to create an opportunity for us to be even more relevant to customers that are at the higher end of the scale," CEO Doug McMillon said at an investor meeting in October 2015, Fortune reported.
The retailer has a long way to go until it catches up with its rival Amazononline — especially as the e-commerce giant expands its apparel offerings.
Amazon is expected to surpass Macy's as the biggest seller of apparel in America this year. Amazon has similarly ventured into more high-end fashion, selling products by designers such as Zac Posen and Stuart Weitzman.