Everett, Wash.
Published: Wednesday, June 24, 2009

Wal-Mart dresses up, hopes to retain upscale shoppers

Associated Press

 The recession steered a new type of customer to Wal-Mart -- deeper in the pockets and suddenly looking for bargains. Now the world's largest retailer has to figure out how to keep that customer when the economy recovers.

So Wal-Mart is bringing in more brand names, ditching scores of other products and even redesigning hundreds of stores to give them wider aisles, better lighting and better sight lines.

It's more than just a cosmetic upgrade. That new breed of customer also spends about 40 percent more than the traditional Wal-Mart shopper, and the retailer senses an opportunity to accelerate its growth.

Take Aditya Krishnan, a 42-year-old lawyer from San Jose, Calif. He used to buy only light bulbs at Wal-Mart but now finds himself spending $150 a month there, including buying workout clothes he used to get at Macy's.

"If I am able to get good stuff at Wal-Mart, and I am able to save money, why would I change?" Krishnan asked. "I am seeing better brands, and the shopping experience is better" than before.

Wal-Mart says that's no accident. It's placing a big bet on the redesign of most of its 3,600 stores, started last fall. This fiscal year, it plans to redo up to 600 at a cost from $1.6 billion to $1.7 billion.

The prototype for the remodeling includes lower shelves to make it easier to see across the store, better lighting and wider aisles. Expanded electronics areas will include interactive displays to test video games and portable gadgets.

The store now carries brands such as Danskin and Better Homes and Gardens, and its electronics section now stocks pricier products such as Palm Inc.'s well-received new Pre smartphone.

Whether it all works, Wall Street analysts say, depends in part on how quickly the behemoth retailer can remodel and keep shoppers satisfied. Concerns about how Wal-Mart will keep its momentum have sent its stock down 13 percent this year.

The early signs are positive, putting pressure on the rest of the industry. Target Corp., whose sales have been hampered by its emphasis on nonessentials such as trendy jeans, is expanding its fresh food offerings. Best Buy Co. is beefing up customer service.

"I believe a lot of what (Wal-Mart) is doing is working," said Joseph Feldman, a retail analyst at Telsey Advisory Group. "They are a threat to everyone."

Wal-Mart, which only three years ago struggled with cluttered stores, long lines, stiff towels and unattractive clothing, has a hurdle to climb. And it has to move fast to win over people who still have negative feelings about shopping there.

"The service still needs to be improved, and the stores are a little sloppy," said Daniel Chou, 35, of Warren, N.J., who was at a local Wal-Mart to pick up a bungee cord but who says he rarely shops there.

Wal-Mart executives say 17 percent of its traffic growth in February came from new customers, and they're spending 40 percent more per trip. More than half of those shoppers living in households that take in more than $50,000 a year.

While that may not be considered affluent, it's a big departure from Wal-Mart's core customers, of whom one in five does not have a bank account or has limited access to financial services.
© 2009The Daily Herald Co., Everett, WA