Wal-Mart Goes Upscale, Sorta
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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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.
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.
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.
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.
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.
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.
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.
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.
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.
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.