Not only low-income shoppers are hunting for deals these days. Better off consumers are also flocking to discount stores to save a few bucks.
Since 2021, budget retailers have seen a large influx of more affluent shoppers, according to data from GlobalData Retail. This year, nearly 28% of high-income people have shopped at discount chains Aldi, Dollar General, Dollar Tree, Five Below, Family Dollar, Lidl, Ollie’s, PopShelf or Walmart, up from around 20% four years ago, the research and consulting firm found.
A key catalyst for the shift is one that has plagued Americans up and down the income ladder in recent years, experts told CBS MoneyWatch: inflation.
Emerging from the pandemic, many middle- and even upper-income consumers had extra savings after receiving federal stimulus checks and because they chopped their spending on categories like travel and dining out, said Neil Saunders, managing director and retail analyst at GlobalData.
But since then, the financial cushion wealthier consumers once enjoyed has shrunk while the cost of living has risen, leading many to seek out more affordable stores.
“They don’t like the fact that more and more of their money is absorbed by essentials and the basics of life,” Saunders told CBS MoneyWatch. “So what has happened is they have sought out better value for money, and they’ve especially done that in grocery and household essentials.”
GlobalData defines middle-income as households with annual income of $56,501 to $169,750, while high-income households are those earning more $169,751. The market research firm taps a range of data sources — including consumer surveys, credit card spending and retailer data — to build a national picture of the retail landscape.
The migration of higher income consumers to discount retailers has “accelerated since the pandemic, and especially since the bout of inflation that started in 2021,” added Saunders, noting that a similar trend followed the 2008 financial crisis.
One of the biggest winners of this trend has been Walmart, according to Saunders. More than 17% of Americans earning six figures today shop at the Arkansas-based company, the world’s biggest retailer, up from less than 15% in 2021, GlobalData found.
To be sure, wealthier consumers don’t face the same financial constraints as low-income people. But high- and middle-income Americans are also looking for ways to beat inflation and stretch their dollar, experts said.
Inflation is well below its 2022 peak, but remains sticky for food and other essentials. Will Auchincloss, an Americas retail sector partner at EY Parthenon, told CBS MoneyWatch, that elevated prices for many goods and services are forcing consumers across the income spectrum to “muscle through.”
Inflation isn’t the only thing driving more people to discount retailers. Better brand selection and a more diverse assortment of products has made budget chains more appealing to a wider audience, Saunders said, noting that retailers like Walmart and Aldi are actively courting more upscale shoppers.
“One of the things Walmart has been doing is refurbishing a lot of its stores, putting a bit more effort into presentation, because it knows that higher-income consumers expect a nicer experience,” he said. “If you provide that, the lower-income consumers like it, too.”
Walmart remodels around 650 stores nationwide on an annual basis, according to a company spokesperson. The upgrades typically include updated layouts, newly painted exteriors and interiors, interactive displays, new signage and checkouts, and interactive displays — reminiscent what you might see in an IKEA store — that allow customers to touch and feel merchandise.
The company has also expanded its brand selections to include manufacturers like Apple and Dell, as well as fashion brands like Scoop and Free Assembly, a Walmart spokesperson told CBS MoneyWatch.
Aldi, which did not respond to CBS MoneyWatch’s request for comment, has also tried make its stores more appealing.
“A lot of their new stores are very bright, they’re very clean, they’re very shoppable,” Saunders said.
“This isn’t about bargain-basement value,” he added. “This is about great prices, very low prices, but in a pleasant and a very aesthetically pleasing shopping environment.”
