Wal-Mart Goes Upscale, Sorta

Discussion
Apr 08, 2005
George Anderson

By George Anderson


Wal-Mart is looking to improve its image and, happily, this time it has nothing to do with “setting the record straight” on its employment practices, its impact on local economies, etc.


No, Wal-Mart’s image makeover is in the area of product quality, where the retailer is making strides to offer the types of products consumers normally go elsewhere to buy, reports The New York Times.


“We found that 54 percent of the people who shopped in Wal-Mart didn’t even visit our home furnishings department,” said Shawnda Schnurbusch, the vice president for home furnishings. “They headed off to places like Bed, Bath & Beyond.”


Getting its current customers to buy from more departments than they are currently is where Wal-Mart is focusing its attention with the strategy.


Says Claire Watts, Wal-Mart’s executive vice president for merchandising, “We will never abandon our core customer, but we do have 100 million-plus people in our doors weekly and we are trying to reach out. For example, we want to reach the women who come in to buy food, but don’t go near our fashion areas.”


To attract more women to its fashion areas, the retailer has focused on design and, according to Ms.Watts, “We’ve upgraded some of our fabrics, our linens, our cottons, our silk blends in our sweaters – we’re using a lot of spandex – and we’ve concentrated more on details.”


One thing that hasn’t changed in this makeover is Wal-Mart’s focus on low prices. According to Ms. Watts, 400-thread queen-size cotton sheets on the shelf in Wal-Mart sell for $48.77. Comparable sheets at Target cost $69.99, she said.


Bob Buchanan, a retail analyst with A. G. Edwards & Sons, thinks Wal-Mart is on the right track with its product upgrades but questions the retailer’s ability to follow through.


“They’re trying a lot of things but today, spring 2005, their overall assortment lacks creativity and originality. They have missed on key products many times,” he said.


In terms of misses, Mr. Buchanan cited problems in consumer electronics. During the 2004 holiday season, Wal-Mart “didn’t have iPods because they got in some kind of snit with Apple, which amounted to a good way to shoot yourself in the foot.” he said.


Another example, he said, is Wal-Mart sells big-screen TVs but no service warranties. “The customer wants service warranties,” said Mr. Buchanan.


Moderator’s Comment: How would you assess Wal-Mart’s progress in its product upgrade strategy? Where do you see this headed in the future?


We have to admit that when we first thought of this, our reaction was that it made little sense to try and pull this off in Wal-Mart stores. It doesn’t
really fit with the retailer’s core customer base. It seemed more logical to us that Wal-Mart would create a new banner/format to offer upscale merchandise at the low prices the
chain is known for.


Our question was answered in part by Claire Watts in The New York Times piece.


“We’re looking to take advantage of who’s coming in now,” she said. “There’s so many people we can serve today. That’s our first initiative. Then we can
figure out how to get the other half of the country.”

George Anderson – Moderator

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15 Comments on "Wal-Mart Goes Upscale, Sorta"


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Gwen Morrison
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Gwen Morrison
15 years 10 months ago
Wal-Mart has demonstrated their unparalleled ability to deliver a clear value proposition that has enhanced the standard of living for a large portion of the world’s consumers. A highly productive business model contributes further to the retailer’s success. As Wal-Mart aims for continued growth, it is inevitable that they expand their appeal to broader audiences. But the challenge is significant. Affluent Americans have shown their willingness to trade off value for time and value for money. They are increasingly shopping club stores and even dollar stores in certain situations, while they choose Whole Foods and specialty apparel retailers in others. This affluent consumer often seeks retail experiences that are highly creative, specialized, and even personalized. Target has tapped into these apirational motives by tapping internationally recognized design talent for the mass market. This builds on their alternative approach to discount retailing that values an extremely clean store with in-aisle brand imagery and highly inspiring promotional themes. While Wal-Mart continues to elevate their in-store experience, the emphasis on value should continue to dominate. They may have… Read more »
Don Delzell
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Don Delzell
15 years 10 months ago
Wal-Mart executives have long understood the concept of “focus on core competencies.” Strategically, those have been supply chain efficiency, store operations efficiency, and advertising. Merchandising “optimization,” referring to targeted, powerful, synergistic assortments….well, this has never been a core competency. Nor has it been necessary. The product areas discussed, home and fashion apparel, require organizational focus, skills, and methods not currently cultivated at Wal-Mart. Buyers are still moved frequently between departments. Buying is still seen as something anyone with half a brain can do. Widgets are widgets. Operational excellence in merchandise assortments may require that Wal-Mart restructure the people, processes and technology used. And, this is probably only necessary for a small subset of the entire store offering. Can this be done? No one has, successfully, in a multi-product environment. Federated, an accomplished merchandising organization, is nowhere near Wal-Mart’s class in supply chain and operational efficiencies. The Limited and Gap organizations have come closest, and both have found one or the other competency slipping at times, requiring refocus and recommitment. However, both of those are simply… Read more »
Len Lewis
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Len Lewis
15 years 10 months ago

There seems to be something of a consensus that Wal-Mart needs a new banner in order to go a bit more “upscale.”

I don’t agree. What they need is better design and execution in existing stores. With few exceptions, departments in Wal-Mart stores don’t “pop.” Very little differentiates the home fashions department from toys or automotive or food. All of them seem to run into each other.

With relatively little effort and capital outlay, Wal-Mart could create distinct departments for every category in the store–setting each apart from one another — making electronics look different than domestics, automotive, toys or even food. Change the configuration of the shelving, gondola heights and layouts to create distinct departments. To some degree, they are already doing this in mens and boys apparel by using different flooring for that department.

Wal-Mart doesn’t necessarily need a new banner for “upscale” products. They need to pay more attention to design and design an environment that creates an upscale perception.

Warren Thayer
Guest
15 years 10 months ago

Good strategy for Wal-Mart, IMHO. Recently, we went to buy a new large-screen TV. Natch, we checked Wal-Mart, figuring on best price. For whatever reason, we didn’t buy on the spot and took a walk thru a nearby Sears. The salesman was right on the money: “Seriously,” he said. “Look at the picture quality on this Sony, really study it. Now, go back to Wal-Mart and check out their best model. It won’t be even close.” He was right, and we came back and bought the TV at Sears. Sears! I could hardly believe it myself. Yeah, Wal-Mart could do with some upscaling of its product mix here and there.

Laurie Cozart
Guest
Laurie Cozart
15 years 10 months ago

I’m not convinced that the product upgrade will work for Wal-Mart. Upgrading the product won’t help if you’re unable to find it. In my experience, shopping the Wal-Mart home fashion aisle is similar to maneuvering an obstacle course. There are a lot of items out of place, hard to reach, on the floor and out of stock. I realize the mass of customers that shop in Wal-Mart on a daily basis contribute to the chaos in the aisles. I don’t see that changing. I agree with George; the upgraded home fashions should be under a separate banner. At the very least, if Wal-Mart is going to spend money and efforts on upgrading the product, they should consider upgrading the presentation as well.

Salvatore J LaMartina
Guest
Salvatore J LaMartina
15 years 10 months ago

Wal-Mart … upscale … Hmmmm. Wal-Mart’s success has come from a single minded focus on sticking to its business philosophy and strategy. The strategy of offering “Always the low price” to the consumer is why they are where they are today. While I haven’t seen demographic data on Wal-Mart shoppers lately, I would surmise that it has not changed in an overly dramatic way in the last few years.

Wal-Mart’s customer base is what it is. They shop at Wal-Mart for one reason, “acceptable” quality at a low price. (I’ll let the spandex quote go without comment.) Focusing upscale for Wal-Mart is an example of succumbing to the temptation for higher margins and profitability at the expense of its core business. This might be akin to a Kia automobile dealership deciding to sell BMW’s from the same showroom.

A strategy of moving upscale for Wal-Mart may be just what its critics and detractors are looking for.

Bill Bittner
Guest
Bill Bittner
15 years 10 months ago

In the April 1st article that discussed Wal-Mart’s same store sales (What’s Up (Or Not) at Wal-Mart?), we suggested that Wal-Mart had a huge opportunity to expand into a higher quality product.

I agree with George – they should do it through a separate banner. I can’t understand why someone who was shopping for inexpensive bed sheets would want to upgrade to 400 thread quality if that was not why they stopped into the store in the first place.

I’m glad to know the Wal-Mart team is reading RetailWire.

David Livingston
Guest
15 years 10 months ago

Wal-Mart didn’t get to $300 billion for going down the wrong track. Going a bit more upscale is what I think Wal-Mart should do. Typically I live by one rule – if Wal-Mart doesn’t sell it, I don’t need it. But sometimes I prefer some higher quality.

Even Aldi is going upscale with some of its product offerings. I would like to see Wal-Mart do this too. It’s important that Wal-Mart squash any hopes that this Sears/Kmart thing will work. Since Wal-Mart is smarter and faster than Sears/Kmart, they probably want to beat them before Sears/Kmart gets their first store open in a year or two, if ever. In a few years, when Sears/Kmart is not with us any more, Wal-Mart will need to fill this void.

Franklin Benson
Guest
Franklin Benson
15 years 10 months ago
I generally support this move but I see it coming with its own set of challenges. Many “upscale products” (but really I’m thinking home electronics here) are also the ones that are the most complicated. A customer who is interested in these complicated products is going to be likely to have questions. I don’t really see Wal-Mart giving 1.4 million employees the training and knowledge to answer every possible question on complicated products. So an uninformed customer is likely to be a frustrated one, and is likely to go to a specialty store where they can get their questions answered. There is a partial solution. Wal-Mart and its vendors need to develop very informative web sites that really do educate consumers. Not that long ago, I bought a new TV, and the choices and options have gotten truly bewildering. I spent fully three weekends researching and learning just to get to the point where I felt I was making an informed choice. But now, armed with knowledge and a written-down list of model numbers, I… Read more »
Mark Burr
Guest
15 years 10 months ago

I can remember when Toyota and Honda and other car makers were considered barely entry level and cheap. Even at their early stages, they were considered low quality. In the cycle of development as a retailer, as a brand, and as merchandiser of products, Wal-Mart may just be where these automakers were 25 or so years ago.

Today, a Toyota or a Honda – or even now a Lexus or a Acura – would never be considered cheap or of poor quality. Whether or not WM has the same type of discipline to continue, expand their offering and explore additional banners remains to be seen. There are, however, several successful business models that have done so. They did so by creating a foundation, a loyal following, consistency and discipline. They did it following their own slogan of ‘relentless pursuit.’ Relentless might just be an adjective used to describe WM.

William martin
Guest
William martin
15 years 10 months ago

As a retired former CPG exec now living in a small town in middle America, I welcome the intent of Wal-Mart to improve quality. We shop certain departments…dry grocery, haba, cleaning products, etc… and avoid others…clothing and, particularly, meat. We are fortunate to have a Kroger across the way from WM and do all meat buying there. Interestingly, see lots of WM shoppers doing the same. As long as WM peddles pre- packaged, solution injected meats, I will seek alternatives.

Somehow, I seriously doubt if even the WM executive team buys meat at WM but probably goes to Sam’s where, because of competition from Costco, they haven’t resorted to the above.

Outside of the aforementioned categories, I think WM does a pretty good job.

Carol Spieckerman
Guest
15 years 10 months ago
Wal-Mart should absolutely continue to pursue better product and they already have. The high-tech fabrics they have added in Starter (athletic apparel) and Danskin are terrific, and upgrades in other departments are noticeable as well. The Carters presentation in kids has proved to be a successful experiment in “better,” and my favorite jeans (which I recently bought in multiples lest they be discontinued) are my low-waisted stretch Levi’s (for the record, I’m a Norstrom/Anthropologie girl). A recent research project we conducted confirmed that cross-shopping between Wal-Mart, Target and department stores is at an all-time high. You simply cannot define the “Wal-Mart customer” any more and they owe it to themselves to snag that better shopper while she’s buying diapers or gardening shears. The only downside are the less-than-enticing displays but that just make it easier for quality-hunters like me to snag overlooked treasures! We all know that suppliers increasingly are not bothering to create lower-quality merchandise for Wal-Mart – they’re just selling the same stuff and taking a margin hit.
Gene Hoffman
Guest
Gene Hoffman
15 years 10 months ago
While Wal-Mart’s same store sales (%) are falling behind hipper Target; with Sam’s losing out to more appealing Costco; and with unions, media and local groups hammering away, Wal-Mart is still producing $300 billion worth cash-register happiness for itself each year. What’s ahead? With increasing energy costs and more credit debt impacting the American and family economies, more “upscale” shoppers will become involved in a phenomenon that might say, “I am dying beyond my means. Where can I buy the quality and fashionable merchandise that I deserve and still want but at lower prices?” Can Wal-Mart make such consumers stoop below their perceived status levels and thereby conquer new coins from their pocketbooks? This represents a big opportunity for Wal-Mart to upgrade some of its assortments to create more repeat-purchase customers for higher-end merchandise. But that’s providing they can brush off their “pick-up truck” image and broaden their appeal to more fashionable American consumers now losing discretionary income. My bet, at this moment, is that Wal-Mart will be able to pull this off. But stayed… Read more »
Hillel A
Guest
Hillel A
15 years 10 months ago

Wal-Mart has done superbly well through out these years. I appreciate the way they have grown in the market. The have adopted some really good things through this journey, but some issues have pulled Wal-Mart down to a greater extent. Its potential to grow is high, not by reducing prices, but by giving quality.

Customers are made to buy according to the price….

If Sony DVD costs $100, then an other brand would be $30. But Sony would last for a pretty long time, the other would be a one year deal.

People have started to realize this now, as time and products have brought their expenses higher, just by purchasing low quality product. So they should try to stick with quality with competitive prices, which will bring up their sales.

Julie Pierce
Guest
Julie Pierce
15 years 10 months ago

The corporate offices have changed and it is now “The Wal-Mart Way” Not Sam’s Way.

The company has changed and the original culture that once made it great has changed and soon there will no longer be any Wal-Mart Stores that have the culture and that, if anything, will be the destruction of Wal-Mart.

They can not see the forest for the trees.

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