Wal-Mart upgrading clothing, furniture to broaden its appeal

By Anne D'Innocenzio
Associated Press

NEW YORK — When Teresa McDowell shops at Wal-Mart Stores Inc., she sticks to buying basic household products and groceries, never crossing the aisle to pick up furniture or clothing.

"I'm pretty much an Abercrombie, Gap, J. Crew, Banana Republic person," the Atlanta resident said.

This spring the world's largest retailer is trying to persuade customers like McDowell to pick up clothes and home furnishings as well, offering them trendier and better-quality merchandise such as fluffier towels and stylish printed skirts.

Wal-Mart is hardly ignoring its core customers who shop for staples on a tight budget. But with rising gasoline prices and job worries forcing those consumers to pull back, Wal-Mart realizes it needs to reach out to style-conscious shoppers — who buy clothing and home goods at other stores — to perk up its slowing sales.

"Wal-Mart is paying more attention to trends," said spokesman Gus Whitcomb. "We are not going to stray away from our value message, but there are customers in the store who are looking for a little extra flair, and we want to make sure we serve them as well."

Still, analysts say it won't be easy, given Wal-Mart's utilitarian, no-frills image. They also say the discounter runs the risk of turning off its customers who may think Wal-Mart's is no longer the lowest price.

"Wal-Mart has been able to get the price-conscious customer, but they haven't been able to go beyond that," said Marshal Cohen, senior industry analyst at NPD Group Inc., a market research company in Port Washington, N.Y. "Target (Corp.) is still outmerchandising and outmarketing the Wal-Mart equation, and because of that, Wal-Mart is not going to grow."

The trendier merchandise at Wal-Mart carries slightly higher prices than its basic items, but they are generally up to 30 percent lower than competitors', Whitcomb said. A flirty skirt under its George store brand sells for $14.57, while boot-cut pants sell for $14.77. Its Home Trends store brand has 400-thread count queen sheet sets priced at $54.77 and $4.24 fluffy cotton bath towels.

"I've noticed some nicer, more fashionable things," said Chantel Brown, an Atlanta resident. "I bought a blouse not long ago that I actually really like."

The Bentonville, Ark.-based Wal-Mart gave more responsibility over the past year to its fashion design department in New York.

Its moves to spruce up merchandise are a response to increasing competition from rivals, particularly Target, which has upgraded its stock with affordable, stylish merchandise from designers like Isaac Mizrahi and Cynthia Rowley.

J.C. Penney Co. Inc.'s sales have also improved, helped by better merchandise. Wal-Mart also has competition from the combination of Kmart and Sears, now called Sears Holdings Corp., which plans a new store format expected to bring together powerful brands including Joe Boxer apparel and Martha Stewart Everyday home fashions.

Unlike Wal-Mart, whose core customer still hasn't benefited from a recovering economy, Target is less vulnerable to consumers' financial constraints; it attracts a more upscale customer while keeping its budget shoppers.

Wal-Mart's strategy to focus on its 100 million weekly shoppers rather than reach out to new ones is a smart one, according to analysts. Fifty-four percent of Bed, Bath and Beyond customers shop at Wal-Mart for groceries and other household items, says Shawnda Schnurbusch, vice president and divisional merchandise manager for the home.

Just imagine the volume Wal-Mart could see if those shoppers bought one additional piece of clothing or home furnishings a month, said Wendy Liebmann, president of WSL Strategic Retail, a New York marketing and retail consulting firm.

But Wal-Mart's merchandising overhaul still has a way to go. In fact, while a Wal-Mart in Jane, Mo., showed noticeable changes, overall ambiance and offerings still lag behind what customers see at Target. Wal-Mart's fitting rooms are a dull gray and its upgraded apparel and housewares selection still trails Target's.

Todd D. Slater, retail analyst at Lazard Freres & Co., said Wal-Mart will probably have an easier time getting consumers to shop for home decor and furniture. "There are no fit and fabric issues," he said.