Wal-Mart sets sights on Target-(Wants to be cheap, upscale, whatever something)

Among the more out-of-character things Wal-Mart Stores CEO H. Lee Scott has been talking up lately is the retailer's quest for more sales to more-affluent shoppers.

To do it, the company's Wal-Mart (WMT) chain - which has built an empire out of going for the biggest discounts for the most price-conscious shoppers - is working to overhaul its merchandise mix, stores and image in hopes of snagging a share.

"Our mistake was that we just kept our focus on how to get better value for that person who's under so much pressure," says Scott, explaining the strategy in an interview with USA TODAY.

Scott says that he has no intention of slighting those core customers - he's just looking beyond at other opportunities to boost growth in sales, earnings and share price. While Wal-Mart continues to post record sales totals overall, Scott is under some pressure. Investors have seen their shares sag about 7.3% in the past year, while the Standard and Poor's 500 index is up 12.5%. Meanwhile, the chain struggled some this spring to keep monthly sales growth for comparable stores up to expectations.

One big factor was rising gasoline prices, which taxed its core customers' budgets. Such hits could be eased, he says, if the chain increased its appeal for customers less sensitive to such economic knocks.

Scott says many of those folks already are among the 100 million shoppers who come into Wal-Mart's U.S. stores every week. He points to sales of big-ticket items such as a Panasonic 50-inch TV for $2,484 as proof that he has customers with discretionary dollars. But more typically, such customers are cruising the aisles with food, paper products, health and beauty aids and cleaning supplies.

Apparel and home goods - discretionary products that carry a higher profit margin and add to the size of the average transaction - are less likely to be in the more-upscale shoppers' carts. Now, Scott, 56, wants them to be able to find something appealing in every department. "The first thing you have to do is make sure that you have the assortment that is broad enough that includes that customer's tastes and styles. That's where you end up with the new LCD TV, 400-thread-count sheets and with more fashion," he says.

Then he has to persuade them to look, and among the things that will require polishing is the discounter's image.

Andrea Warren, an event planner in Houston, loves Wal-Mart for cleaning and beauty products and also recently spent $125 on computer cable and memory cards. But she keeps her Wal-Mart habit to herself. "It is my dirty little secret," says Warren, 32, who says Wal-Mart isn't "socially approved" like Target, which is known for its "cheap chic."

Beyond that, he knows he has to address the company's social responsibility image, which has taken recent hits and is a target for unions trying to organize the workers at the nation's largest private employer.

Curt Barnett, a tax and insurance manager in Long Beach, says reports of low pay and other issues have kept him out of the stores. "As the world's largest retailer, they could set a much higher bar for community support and involvement, employee benefits and work environment, corporate and environmental responsibility," says Barnett, 34.

Scott has mounted a counterattack on such criticisms. "Where the critics are correct, you change. And when what you're doing is right for your company, you explain it and get on down the road, taking care of customers," says the 26-year company veteran who's been in the top job for nearly six years.

Wal-Mart tended not to offer such explanations in the past, he says. "The (negative) publicity that we didn't speak to over a period of years has not helped us at all. What we're doing today is getting our message out. There are things about us that you may not like, but you can't just listen to the anti-Wal-Mart argument."

Scott has made himself a much more visible spokesman for the company, which also has launched a Web site on its business practices and this year hosted its first event for the media at its Bentonville, Ark., headquarters.

For the chain's style image, or lack of it, the big rival is Target. That discounter's deals with several designers have produced apparel and home goods that have built a reputation for "cheap chic." That has brought more upscale customers and wider profit margins.

About 45% of Target's merchandise consists of discretionary items - furniture, electronics, sporting goods, entertainment, apparel - vs. 30% for Wal-Mart, estimates Jeffrey Klinefelter, retail analyst at Piper Jaffray.

"By providing up-to-date, trend-right fashions to its customers, Target has established itself as the apparel destination of the discount channel," he says.

Target chose to go more upscale with style at a discount, rather than try to go head-to-head on prices with the giant Wal-Mart buying-and-distribution machine. The Minneapolis-based retailer's heritage as former department store operator Dayton Hudson, whose subsidiaries included Marshall Field's, brought experience and flair in merchandising, display and service to the discount level.

The recipe continues to be a success. In the past 12 months, Target averaged about 5.1% same-store sales growth, compared with 2.4% for Wal-Mart, says Gint Rimas, senior analyst at Thomson Financial. The last time Wal-Mart's sales at stores open at least a year grew more than Target's was May 2004. Rimas adds that Target, with 1,300 stores and $47 billion in sales, has more room for percentage growth than Wal-Mart, with 3,700 stores and sales of $285 billion.

Investors have bid up Target's stock nearly 31% in the past year, as Wal-Mart's stock declined, and that has added to the sense of urgency for Scott and his company.

"While turning a battleship is not easy, there is clear determination and urgency across the ranks," says Goldman Sachs analyst Adrianne Shapira.

•New marketing. A national campaign of slicker ads recently rolled out with, for example, kids in cool athletic wear on a basketball court and a young professional in career wear from the chain's George line. The focus is the style - and Wal-Mart's trademark yellow smiley face from its price-cutting ads is not in these ads.

"Their (ad) strategy, which has been about price, convenience and friendly people, will have to be course-corrected to be appropriate for fashion," says Julie Cottineau, executive director of consumer branding at Interbrand.

More dramatic changes might be needed, she says. "Because they have come from so many other categories that are accessible commodity goods, this is a really big leap for them. And they would have to do something really disruptive to get credibility, such as bring on a well-known designer like Donna Karan or Calvin Klein to do discount brands."

•Better execution in stores. Changes from tidier sales floors to faster checkout are underway. The way Scott sees it, messy stores are mainly a local management issue. But Eduardo Castro-Wright, COO and former head of Wal-Mart de Mexico, has been made responsible for making sure stores are neat and offer better ambience.

"Eduardo is working through his management team to make sure that we have the appropriate standards and that we're holding people accountable for what those stores look like," says Scott. But he doesn't underestimate the challenge, either. "In cases of an extraordinarily high-volume store, tidy might be a word that you don't ever reach, but it certainly will look clean, will look organized and look in control."

The company also has moved to simplify some displays and make them roomier. It dropped some private-label apparel items that have overlapped in styles or were inconsistent in colors.

"Across feminine apparel, we took a stand on what colors will be important and what silhouette is going to be important," says Scott.

•Improved store design and display. Less merchandise stacked at the ends of aisles, faux hardwood floors in apparel sections and more room between apparel racks have been part of a mandate for a more attractive presentation.

Customers looking for more upscale goods will have an easier time finding them. Better signs will direct them to various departments, and more fashionable merchandise will be displayed closer to aisles.

Scott says that by burying such products within departments, while giving the best display mainly to the lowest-priced goods, such as summer dinner plastics for 63 cents, Wal-Mart made itself less relevant to higher-income customers. "On every end-cap, that's the kind of price points that they saw. Now, the new product is on an aisle, and it's selling," he says. "As that customer comes to really trust that we're relevant to them, we'll be able to move that item within the aisle, and the customer will shop it."

•New merchandise. More-affluent shoppers still want to save money, but their higher incomes also make them more sensitive to fashion trends.

Wal-Mart sees its proprietary apparel line George as an important part of its fashion push. Popular in Britain, where it was created for the Asda retail chain now owned by Wal-Mart, George didn't have as much success when it came to U.S. stores in 2001.

"Did it flop? Yes and no," says Marshal Cohen, chief industry analyst for market information company NPD Group. "Yes, because it didn't accomplish nearly the branding power that it did in Europe and become for Wal-Mart here what the (designer Isaac) Mizrahi line is for Target. No, because it still made them money."

Wal-Mart will continue to design George in the U.K. and hopes to be faster to the market with the right looks. Beyond George, it has opened a buying office in New York whose job is to keep more hip goods coming. With its huge buying commitments, Wal-Mart has tended to play it safe with fashion. But the New York office is aimed to give Bentonville direction on fashion trends from apparel to entertainment to gadgets.

"To be on top of the trends - colors, fabrications - one of the things you have to do is be where those things either originate or where they first are adopted in the U.S., and New York is just a great place to do that," Scott says.

Despite the new appeal for upscale consumers, Scott says, Wal-Mart remains committed to value that satisfies the core, price-conscious customers who have made it the biggest retailer in the world. To go after new sales in a way that the core group suddenly feels abandoned would be the biggest the mistake of all, he says.

"Nothing changes there," he insists. "This organization is too big and too important to allow it to go from ditch to ditch - taking care of one customer but losing your core customer."

Our mistake was that we just kept our focus on how to get better value for that person who's under so much pressure," says Scott

im just a bit ticked of to respond. i'm sorry im not so sophisticated Scotty , I'll bring a tie next time i roam the china isles.

Walmart is an evil megacorporation, wrapping itself in Americana trappings while acting as a storefront for ChiCom products and obliterating small businesses everywhere.

So far, the Japanese have turned their noses up at Walmart's attempted marketplace invasion.

I would think that with Walmart getting one hundred million customers a week shopping in their stores they won't mind a little Free Republic bashing.

Now where is that boycott Walmart thread? I thought I saw it around here a short time ago.

Bill Gates is the Anti-Christ. Exxon is evil incarnate. GM is the devil in disguise.

Ooops! I'm sorry. I thought I was on DU after I read your post. NEVER MIND!

This article had snobbery written all over it. I don't know anyone who's ashamed they go to Wal-Mart because it's not "high class" like Target. Where do they find people like that lady in Texas?

If Wal-Mart wants to try to cut into Target's business, they'll have to sell better quality clothes and furniture.

That said, my buying habits have changed so much in recent years due to BJ's and Costco that I don't really spend too much time in Target or Wal-Mart anymore.

Improved store design and display. Less merchandise stacked at the ends of aisles, faux hardwood floors in apparel sections and more room between apparel racks have been part of a mandate for a more attractive presentation.

Shopping wise, this is my biggest problem with Walmart. It is barely one step above a warehouse club. Crap piled in the middle of aisles, shelves disorganized, and just a generally feeling "K-marty" from when K-mart really took its dive.

About the only thing I buy there regularly are watch batteries because they have a good selection, have the same energizer brand as everyone else and are cheaper than any retail store in the area. Other than that, Target and Meijer have prices which are close enough where it isn't worth the effort to drive to and walk around Walmart.

From what I've seen of the shabby, cluttered SuperWalmart that recently opened here (including their surly employees and unnavigable layout) then this article definitely qualifies as a trendy fabrication, but I think this person meant to say trendy fabrics..

I would shop at Walmart more often if they just implemented two simple rules:

1. A family is only allowed to bring 5 family members to the store at any one time, only 3 of whom can cry at the sametime.

2. Exiting traffic should be directed to the rear of the parking lot and entering traffic to the front.

The stress of shopping at our Walmart begins in the parking lot. I wish I had the old beat-up pickup truck for shopping at Walmart.

If I can shop after hours, it's not so bad, but during the day, it seems like entire extended families hang with Mom in the aisles. I love kids, but (in my older age), multiple misbehaved kids per family is too much to bear. We have a Target adjacent to the Walmart. Target FEELS like a more sane shopping experience.

"Pardon me, but could you be a good chap and kindly direct me to the caviar aisle?"

"Certainly, sir. You'll find Wal-Mart's extensive selection of molded caviar-like substances on aisle 7, with well-known brand names such as Ameri-Valu, SoyTech and Beijing Specialty Plastics."

Wal-Mart Stores CEO H. Lee Scott has been talking up lately is the retailer's quest for more sales to more-affluent shoppers.

Kohl's and Target attract shoppers in no small part because they aren't Wal-Mart, which is seen as the home of cheap, plastic crap. Short of a name change I don't see how Scott is going to alter that. And if he does then what will the reaction of his current customer base be? Will they go trooping over to K-Mart?

****Walmart is an evil megacorporation, wrapping itself in Americana trappings while acting as a storefront for ChiCom products and obliterating small businesses everywhere.****

It's funny that when these discount stores announce their grandiose plans for improvement or upscaling they never mention placing more clerks on the floor.

I sometimes wonder how many mega-millions of customers walk out of the stores because they can't find both a product and a clerk to help.

I refuse to plod all around the vast nether regions of a WalMart or Target looking for a clerk. A lot of folks evidently like this torture.

One of the most amusing things is trying to chase down a clerk. No matter how short the legs, the clerk will escape you every time, turning a corner and disappearing forever from view.

Leni

LOL!

I don't like going into Walmart because its always a mess and there's always a new and troubling smell to be found. And I've seen and smelled some of the worst things there: A boy, maybe ten years old and obese, unclean, walking around gnawing on a chicken leg...grease all over his mouth (I tried really really hard not to gag when I saw that one). A diaper left outside one of the dressing rooms like a stink bomb from hell (I almost passed out). Half empty trays of crappy donuts with flies buzzing around (uhhh no thanks). Filthy bathrooms (never, ever again). And your right about the family thing; where I live, people go to Walmart like its a family outing. Pretty soon there will be family renunions in Walmart!

I only go to WalMart to buy Rubbermaid plastic tubs -- good price.

That being said, the only problem with Target is they never have EXACTLY what you're looking for--you can only find something CLOSE to what you're looking for. It's a strange phenomenon which has been noticed by all my family members.

Except for groceries, I shop online for the most part.

A tidier sales floor and faster checkout would go a long way in improving the Wal-Mart shopping experience.

A Target opened across the street from Wal-Mart in my town. I can get in and out of the store so much quicker. I have only shopped a Wal-Mart a handful of times since the Target opened.

We have a Super Target which has 32, yes 32 checkout aisles, of which exactly four will be open at any one time except Christmas.

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