NEW YORK — Head south on Fifth Avenue, past the look-but-don't-touch boutiques of Bruno Magli, Salvatore Ferragamo and Henri Bendel, stop at 31st Street and look for a building on the right, between the fast-food restaurant and the souvenir shop.

There, on the sixth floor, sits the only Wal-Mart in Manhattan — not a store, but offices, a laboratory even, where veterans from Nautica, OshKosh B'Gosh and the West Elm furniture catalog work, largely in secret, to help the nation's largest retailer earn one designation that has long eluded it:

Hip.

These retail warriors walk the streets of SoHo, sneak into boutiques in London and snap photos of teens in Tokyo to divine what's hot. They forecast trends in clothing, home decor and furniture in advance of a season, then transmit the details to the colleagues in Arkansas who ultimately determine what reaches the shelves of the company's 3,400 stores.

Given its reputation as a juggernaut, it's a curious sensation to consider Wal-Mart's vulnerability. But that is what the two-year-old New York Trend Office is there to address.

With trends in fashion trickling down into everything from toasters to infant clothing, the chain is suddenly worried about missed opportunities. Since its 1962 founding, it has built its business on the traditional-minded, lower-income shopper who, judging by its merchandise, wants the basics: a sturdy nightgown, a reliable bathing suit, a six-pack of children's underwear. (Wal-Mart sells one of every two pairs in the United States.)

The discount giant has stuck by that consumer, earning billions in the process. But now it is rethinking things — placing ads in that fashion bible Vogue; having its TV commercials portray a lifestyle, not just a smiley face rolling back prices; even considering hiring a big-name designer. For it has not escaped the attention of Bentonville, Ark., that the rest of the retail world has discovered a different, more lucrative shopper — one who craves style for style's sake.

As Wal-Mart upgrades its merchandise to compete with edgier rivals, the New York staff is serving as a scouting party, watching carefully to ensure that a chain known for missing trends has the right product at the right moment. But for its globe-trotting exploits to pay off, the Trend Office must change not just what Wal-Mart carries but how the retailer thinks about merchandise, according to those inside and outside the company.

For 43 years, Wal-Mart has been obsessed with individual bargains — the $24 DVD player, the $12.90 twill jacket — regardless of how they fit in with the rest of the store's merchandise, or even whether they are in style. That singular focus on best sellers has left the chain without the storewide design aesthetic that has turned rival Target into Tar-zhay, crammed with bold, contemporary patterns and designs that evoke a lifestyle. And it has left Wal-Mart vulnerable at a time when customers at all levels want fashion.

"We are an item house," concedes Claire Watts, Wal-Mart's vice president of product development. "But customer expectations require more than great items."

What they require, designers say, are risky forays into fashion, the kind that could alienate Wal-Mart's core customer.

For designer cachet, Target recruited architect Michael Graves and designers Todd Oldham and Isaac Mizrahi to create clothes and home furnishings exclusive to the chain. Hip Swedish retailer H&M snagged Karl Lagerfeld to do the same.

This movement goes by many names: the democratization of fashion, the dawn of cheap chic. The motivation is simple: A globalized generation of consumers, reared on the endlessly self-improving and consuming message of "Queer Eye" and "What Not to Wear," is eager for the next trend, even if that skirt or sofa or sneaker lasts only one season.

Wal-Mart has lost ground to its competitors in the fashion arena, analysts say. One hundred million consumers shop at Wal-Mart every week, but only 34 percent buy apparel there, according to a study by STS Market Research.

Hence the Trend Office in New York, with its 10-person staff, mostly freelance consultants, including Fran Yoshioka, a former trend and design director at Sears; Bryan Norris, formerly a design director for men's clothing at Nautica; and Lynn Neulander, who has designed home lines for Jonathan Adler and Tracy Porter and apparel for Levi Strauss and Van Heusen.

Designers at work on 2006 lines have shopped the world's fashion capitals for the right mix of colors, fabrics and cuts. For spring and summer, "color has gotten neutralized and softer," said Yoshioka, creative director for women's clothing. "Everyone wants to do bright colors, but neutrals are the right thing to do.

In a first, Wal-Mart will have an advertisement in an upcoming issue of Vogue depicting Wal-Mart shoppers discovering style in the store, said Julie Lyle, the chain's vice president of marketing and advertising.