Why today’s smartest shoppers are at Walmart, Costco, Ulta, and Ross

FastCompany: There used to be a clear divide between the people who shopped at Walmart and those who shopped at Saks. Not anymore. Consider the shopper on Walmart’s website loading up on the basics: a 12-pack of paper towels, a few boxes of mac ’n’ cheese, a gallon of milk—all from Walmart’s private label, all cheaper than national brands. Then, into the same cart, she drops a $627 pre-owned Louis Vuitton handbag that Walmart has certified as the real thing. The next morning she swings by Ulta for $12 Maybelline foundation and the $36 Drunk Elephant face wash she refuses to live without.

A decade ago, when the economy was humming, this woman—a six-figure earner—would have spent much of her money at stores built on aspiration and exclusivity, like Saks Fifth Avenue, Whole Foods, and Sephora. But in this turbulent economy, she’s willing to trade down on many products to save. America is in a cost-of-living crisis. Inflation hit 4.2% in May, its highest in three years, driven by an energy shock from the war with Iran. Gas prices jumped more than 40% from a year earlier, and grocery items like tomatoes spiked more than 30%.

Up and down the income ladder, people are scrambling to stretch their dollar—and even affluent shoppers are gravitating toward retailers that compete on price and value. “The upper end of consumers are trading down,” says Marshal Cohen, Circana’s chief analyst for retail. “ Everyone is pulling back on spending.” This didn’t happen overnight. Inflation has been creeping up since the pandemic, which is when higher-income shoppers first started defecting to lower-end stores.

The middle class— defined by Pew as households earning between $56,600 and $169,000 annually—are struggling to keep up with their upper-middle-class peers when it comes to housing, schools, and vacations. Meanwhile, households a rung or two above the middle classes are getting significantly richer, thanks in large part to the stock market. The result is a tiered system of perceived (and real) scarcity, which has driven a larger portion of the middle classes toward retailers that help them save money on their everyday shopping expenses. The retailers winning right now are the ones that saw this coming.

Walmart , Ulta , Costco , TJ Maxx , and Ross are all booming—with sales up by between 7% and 21% in the most recent quarters. They’ve turned the trade-down economy into an art form, courting the budget and deep-pocketed shopper in the same aisle by offering rock-bottom prices for the customer counting every cent, with just enough elevated merchandise (premium soda, prestige skincare) sprinkled in to keep the wealthy interested. At the same time, the department stores built on aspiration are sliding.

Nordstrom , with its stock down 61% over five years and its full-line stores losing ground to its own off-price chain, was taken private last year; Macy’s is closing roughly 150 stores in a multiyear retreat; and Saks , the onetime temple of luxury, filed for bankruptcy in January. “Walmart and Costco have become the new brands of the middle class,” says brand strategist Eugene Healey. These brands didn’t win simply by slashing prices; markdowns are a race to the bottom. What sets the winners apart is how they’ve made value feel smart, even pleasurable. Their playbook breaks down into four lessons that any retailer can pull from.

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The article discusses significant shifts in retail strategies among major brands, which is impactful for the industry, while the concepts of blending low-cost and premium products are somewhat established but still relevant to brand strategy professionals.