Wal-Mart: Back to Basics for the Holidays

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The company's pronouncements came amid a flurry of retail news. Target (TGT), Saks (SKS), Staples (SPLS), Home Depot (HD), BJ's Wholesale Club (BJ), American Eagle Outfitters (AEOS), TJX Cos. (TJX), and Abercrombie & Fitch (ANF) all reported their results for the quarter. The stocks largely rose for the day, with strong results particularly from luxury retailers and Federal Reserve comments that interest rate hikes may be on hold for now. However, Circuit City (CC), which competes against Wal-Mart in electronics, saw its stock take a hit because of the prospect of a brutal price war (see BusinessWeek.com, 11/14/06, "Unhappy Holidays for Circuit City?").

Experts say Wal-Mart is looking to shore up its base during the critical holiday shopping season, reaching out to its core customer with its "everyday low prices" and more. "Altering Wal-Mart's image is like turning the Queen Mary around," says Robert Passikoff, president of brand consultant Brand Keys. "It doesn't matter how many 10-page supplements you buy in Vogue—you can't change your image on a dime." (See BusinessWeek.com, 9/28/05, "Wal-Mart Crashes the Fashion Party.")

Attentive Associates

Still, Wal-Mart has a lot riding on attracting higher-income shoppers. Surveys show that 80% of Americans shop at Wal-Mart, and people with incomes over $100,000 are already buying their grocery and other staples from the retailer. CEO Scott said last year: "We've got to make sure that those customers aren't bypassing [our] other departments."

Targeted merchandising is Wal-Mart's forté. Wal-Mart is well known for mining its data and making great use of its internal research. For instance, it has one of the best stocking and inventory management systems in the world. But critics say that Wal-Mart has stumbled in its high-end strategy, not because it didn't use data properly but because it failed to live up to customer's expectations.

Patricia Pao, founder of retail consultant Pao Principle, says that the desired upscale customer expects a level of service that Wal-Mart hasn't been able to provide. "I saw Wal-Mart's fashion show in New York and the line was really trend-right, but the store just doesn't provide the experience in terms of layout and service," says Pao. "This incremental customer is bound to walk out of the store empty-handed."

Wal-Mart's Williams says that the company is determined to make the necessary improvements to its stores. "We have remodeled 800 [of the targeted 1,200] stores so far this year with new layouts," she says. "[And we have] also implemented a new scheduling system via which we have more associates available at busier times of the day."

Gogoi is a reporter for BusinessWeek Online in New York.