Recent quarterly earnings reports from Walmart, Costco, and Dollar Tree suggest that consumers are still spending, but are looking for low prices and perceived value.
In May, Walmart reported a 7.3% year-over-year increase in revenue for the quarter ended April 30 (ecommerce-only sales grew 26%). Costco posted strong YoY sales growth — 6.6% excluding fuel — for the three months ended May 1. And Dollar Tree raised its outlook after reporting improving sales, up 7.2% YoY for the quarter ended May 2.
While they target different shoppers, all three retailers share a reputation for delivering relative value and inexpensive goods.
The benefits extend beyond pricing. Value-conscious shoppers can be more difficult and expensive to acquire. They compare prices, delay purchases, and look for reassurance before clicking the buy button.
Walmart, as an example, is known for competitive pricing and convenience. Costco has built its business on the idea that buying in bulk delivers better value over time. Dollar Tree appeals to shoppers seeking affordable essentials.
The common thread is not necessarily low prices. It is clarity. Shoppers quickly understand why the purchase makes sense.
Value and CAC
Customer acquisition cost depends on more than advertising rates. Conversion rates play an equally important role.
A shopper who visits three websites before making a purchase is less likely to convert on the first visit. So a single ad might require multiple clicks to earn a sale.
The result is a relatively higher CAC.
Hence some ecommerce merchants may struggle with customer acquisition costs even with well-managed advertising campaigns. The issue may be that shoppers need more evidence or time before purchasing.
Make Value Obvious
The takeaway here is that online retailers should focus on communicating value.
One way to communicate a product’s value is to focus on outcomes rather than features.
Consumers do not buy a backpack because it is made of 1,000-denier nylon (although this should still be in product specifications). They buy it for years of travel. Likewise, folks may care less about the particulars of a frying pan so long as their eggs won’t stick.
In a value-based shopping economy, the most effective marketing might be the signals that help shoppers justify a purchase.
Product pages can explain durability, warranties, savings, or long-term performance. Content marketing can demonstrate expertise, compare alternatives, or answer common objections. Reviews, testimonials, and guarantees can reduce perceived risk.
Each element provides evidence that the purchase is worthwhile, requiring less persuasion. Fewer doubts lead to higher conversion rates, making every advertising click more productive.
Walmart, Costco, and Dollar Tree each communicate value in different ways. The common thread is that shoppers rarely need to guess why the purchase makes sense. Ecommerce merchants may benefit from applying the same lesson.
