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Archive for Sunday, June 28, 2009

Catering to a new market

Wal-Mart aims to keep the bigger spenders it has won over during the recession

Lawrence resident Andrea Baloga grabs some limes Thursday in the produce section at the new Wal-Mart at Sixth Street and Wakarusa Drive. Wal-Mart is remodeling many of its stores and designing new ones to give them wider aisles, better lighting and better sight lines. The corporate discount giant is also bringing in more brand names to please bigger spenders who began shopping there after the economic recession began.

Lawrence resident Andrea Baloga grabs some limes Thursday in the produce section at the new Wal-Mart at Sixth Street and Wakarusa Drive. Wal-Mart is remodeling many of its stores and designing new ones to give them wider aisles, better lighting and better sight lines. The corporate discount giant is also bringing in more brand names to please bigger spenders who began shopping there after the economic recession began.

June 28, 2009

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The new electronics departments of some Wal-Marts, like this one at Sixth and Wakarusa, are designed to be more interactive.

The new electronics departments of some Wal-Marts, like this one at Sixth and Wakarusa, are designed to be more interactive.

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 — features that already have been worked into a store that recently opened in Lawrence at Sixth Street and Wakarusa Drive, and will be included in a store opening next month in Leavenworth. Expanded electronics areas will include interactive displays to test video games and portable gadgets.

The store now carries brands like Danskin and Better Homes and Gardens, and its electronics section now stocks pricier products like 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 like 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.”

Other discounters, including TJX Cos. Inc., which sells name-brand fashions and home furnishings, Costco Wholesale Corp. and BJ’s Wholesale Club Inc., are focusing on how to hold on to new customers lured by low prices during the recession.

But Wal-Mart, which only three years ago struggled with cluttered stores, long lines, stiff towels and unattractive clothing, has a bigger 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.

Stock in Wal-Mart and a few other discounters such as Costco Wholesale Corp. have fallen this year as investors turn to beaten-down shares of more upscale companies like Macy’s Inc. and Williams Sonoma Inc., which investors believe don’t have much further to fall.

Wal-Mart, which topped $400 billion in sales last year, attracts more than 140 million customers per week. But to get them to buy more than just groceries, which account for about half of annual sales, it’s paring its product lineup and making room for better brands.

Consultant Burt P. Flickinger III estimates the remodeled stores are carrying 10 to 15 percent less inventory, particularly getting rid of no-name labels.

The shift risks turning off longtime customers who are looking for only the cheapest products. It’s happened before: The company had to dump Metro 7, its in-house clothing line launched in 2005, because it turned out to be too trendy for its general clientele.

Wal-Mart executives say 17 percent of the chain’s traffic growth in February came from new customers, and they’re spending 40 percent more per trip. More than half of those shoppers live 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.

To keep prices low while offering better products, Wal-Mart is slashing its own costs in little ways. The Angus ribeye steak being sold at Sam’s Club at 25 percent below competitors’ prices is paid for in part by a switch to shorter straws at its café, saving $52,000 a year, says spokeswoman Susan Koehler.

A recently converted customer is Judy Safern, a 42-year-old public relations executive from Dallas who used to buy her children’s clothing at Galleria mall and groceries at Tom Thumb supermarket.

She now says she hasn’t been to the mall in a year and figures she saves several hundred dollars a month by buying most clothing and food at Wal-Mart. “I basically buy everything there,” she said.

Staff writer Mark Fagan contributed to this report.

Comments

gl0ck0wn3r 4 years, 9 months ago

That's what I thought. Shut it, old man.

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gl0ck0wn3r 4 years, 9 months ago

"merrill (Anonymous) says… If more people would take the time to price check they would realize there is not a lot saved and sometimes nothing. It's the Wal - Mart shell game aka saturating the market with advertising convincing the public."

Really? Prove it - statistically - with your own work. I dare you.

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blue73harley 4 years, 9 months ago

Pilgram2 is exactly right. If that environmental job killer bill passes, the few manufacturers left in the US will flee to other countries. It ain't Walmart folks. All manufacturing is in danger in the US because we encourage them to go elsewhere. How many motorcycle helmets are built in the US? Last time I checked, there was one and it was extremely high priced. Why is this? Thank a lawyer. The majority of all metal castings are now made abroad, especially in China. Why is this? Thank an "environmentalist".

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Music_Girl 4 years, 9 months ago

Yes by all means, let's make the corporate giant even bigger so it can fully suck out our souls.

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Richard Heckler 4 years, 9 months ago

If more people would take the time to price check they would realize there is not a lot saved and sometimes nothing. It's the Wal - Mart shell game aka saturating the market with advertising convincing the public.

Are we shopping our way straight to the unemployment line? http://www.fastcompany.com/magazine/77/walmart.html

Judging from the looks of things, this process might have worsened http://wineandbowties.blogspot.com/2009/06/are-we-shopping-ourselves-out-of-jobs.html

Other substantial issues that impact OUR tax dollars: http://walmartwatch.com/issues/

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parrotuya 4 years, 9 months ago

Wal-Mart is 100% pure evil. There is no excuse for their dishonest business practices and poor customer service. One day, the Wal-Mart ponzi scheme will collapse. I look forward to that day! Even more tax cuts for the wealthy won't save them.

DOWn, baby, DOWn!

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pissedinlawrence 4 years, 9 months ago

notajayhawk~ you must not have a life to write all that, if your not a jayhawk then get out of town. haha loser. by the way i LoVe walmart and will always shop there!! just saying they have higher prices at the new store, i'm showing the love, letting people know! Seriously notajayhawk get out of the house every once in awhile, lol

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notajayhawk 4 years, 9 months ago

just_another_bozo_on_this_bus (Anonymous) says…

"I'm so pleased to now have twice as many opportunities not to shop at Wal-Mart."

I'm equally pleased I don't have to run into you there. And I somehow doubt the Waltons are hurting without your contribution.


beobachter (Anonymous) says…

"Informed, yea, check out any clothes, hardware, toys, furniture, lawn mowers, tools, etc, etc."

Yeah, this flat screen in our living room that I paid $200 less than I would have paid at Best Buy is going to last a shorter time because it knows it was purchased at Wal-mart. Same with the baby swing, travel system, high chair, etc. And we regularly buy clothes, hardware, toys, furniture, tools, etc. (haven't needed a lawnmower lately - but come to think of it, that is where I got my last one) - all of which last just as long as the identical items purchased elsewhere.

Maybe you should stay out of the no-brand bargain bins.


pissedinlawrence (Anonymous) says…

"I am serious about this, I shop at Wal-mart all the time and it is unfair for them to raise prices at their new store."

I am serious about this: Shop at the Iowa store if you don't like the prices at the new one.

How is having a higher price at one location "unfair?" How is it any different than QuikTrip selling a two-liter of pop for 40% more than you can get it for at the grocery store? Or a McDonald's value meal selling for $3 more than the exact same value meal if you buy it at the airport? You're paying for the convenience - if you don't like it, drive to the old store.


Stain (Anonymous) says…

"They are going for a slightly more upscale market because their base is broke."

Quite possibly the stupidest statement of the month. You do realize, don't you, that you're talking about the biggest company in the world, one whose profits are increasing even faster than their revenues, and one that's adding about 22,000 new jobs at around 160+ new or expanded stores just in this country?

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Stain 4 years, 9 months ago

The caption under the picture is - let me put this nicely - not true.

Wal-Mart started losing business from its normal market because local economies were hurting, as a result of Wal-Mart taking over all the jobs and running other businesses out of town. They have to have customers, and their customers have to have money, so it was bound to happen that their predatory practices ended up hurting their own bottom line.

Enter the "Gracy" line of stores. The Gracy is a more upscale version of their regular stores, the "Darla." They are going for a slightly more upscale market because their base is broke.

And all this happened well before the economic crisis hit.

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Stain 4 years, 9 months ago

beobachter knows of what he speaks.

Google "Snapper lawn mower Wal-Mart" and read what comes up.

The same brand on an item at Wal-Mart is likely a cheapened-down version made specially for that store.

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Stain 4 years, 9 months ago

Why this article? Are we going to see articles about Target, Pennys, Sears and Kohls soon also?

Methinks the new Wal-Mart is not doing as well as expected. I live near there and I notice the parking lot is never full, even half full, even at peak shopping hours.

Did the new Wal-Mart simply cannibalize business from the old one?

Sometimes it's ok to say "I told you so."

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Pilgrim2 4 years, 9 months ago

merrill (Anonymous) says…

Wal-Mart = shopping people out of jobs

But keeping those China government officials very happy. They love tying up american money that remains out of circulation for who knows how long?


You ain't see nothin' yet, Richard. Wait until you see what the cap & trade shell game your buddies in the House cooked up does to the US job market. Wal-Mart will be just a drop in the bucket once the rest of the manufacturers flee the country to eliminate our new confiscatory energy prices from their expenses.

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Norma Jeane Baker 4 years, 9 months ago

Sorry, beo, I still think your claim is weak. I've been buying jeans at WM for years. A pair of Lee jeans lasts me the same, whether I pay $18 or $48.

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beobachter 4 years, 9 months ago

Informed, yea, check out any clothes, hardware, toys, furniture, lawn mowers, tools, etc, etc. See how often you replace them compared to paying more for a quality product.

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Norma Jeane Baker 4 years, 9 months ago

Yes, beo, EVERY time I buy notebook paper at Wal-Mart I end up having to replace it. The same goes for pens, pencils, soap, shampoo, vitamins, etc.

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beobachter 4 years, 9 months ago

Walmart is where you go when nowhere else has it and you can't wait for delivery from web sites. And then you accept the fact that what you buy is poor quality and need replacing very soon. Only exception is food.

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vinividivici 4 years, 9 months ago

Walmart.......shopped there, worked there, quit there, refuse to go back. I find good deals just fine else where. I don't judge those who still shop there, I just consider myself enlightened to the greater good.

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Richard Heckler 4 years, 9 months ago

Wal-Mart = shopping people out of jobs

But keeping those China government officials very happy. They love tying up american money that remains out of circulation for who knows how long?

The more Wal-Marts the fewer choices.

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parlet 4 years, 9 months ago

Shop at WalMart = dig your own grave.

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Leslie Swearingen 4 years, 9 months ago

My daughter works at Walmart and I do all of my shopping there. Buy only local is so much hooey. Are we immoral? Regardless of how we live our lives? Because of our connection to Walmart? And, then I presume our morality would improve if she started to work at Target and I shopped there? Maybe they could put, Abandon Hope Ye Who Enter Here over the door and the greeters could be dressed as demons and special effects. You think?

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madmike 4 years, 9 months ago

A leftist like Scott talking about morals. How amusing!

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Liberty_One 4 years, 9 months ago

seller* yikes, my grammar is poor this morning...

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Liberty_One 4 years, 9 months ago

Scott, how is that immoral? A willing selling and a willing buyer have made a transaction.

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scott3460 4 years, 9 months ago

"I am serious about this, I shop at Wal-mart all the time and it is unfair for them to raise prices at their new store."

I am no fan of Walmart, but what a ridiculous statement. Those who run Walmart know the majority of Americans are too stupid and lazy to ferret out such behavior, let alone act in response, so why shouldn't they be able to take advantage of such people. It may be immoral, I'll grant you that, but those who shop at and support Walmart's anti-worker, anti American, anti environment and anti small town agenda have already demonstrated they have little concern for moral behavior.

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just_another_bozo_on_this_bus 4 years, 9 months ago

I'm so pleased to now have twice as many opportunities not to shop at Wal-Mart.

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shleppy 4 years, 9 months ago

wow. I bet mcdonalds is awesome too. support your local businesses.

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pissedinlawrence 4 years, 9 months ago

My Husband and I were glad to have the new Wal-mart open up, as it is much closer to us. We have come to realize the prices are more expensive on the exact same items at the new Wal-mart. We checked produce, grocery, electronic, and many other items. One item was twenty dollars at the new Wal-mart and the exact same item was eighteen dollars at the Iowa Wal-mart. Please tell your family and friends! Go to each walmart and compare the prices, you too will be shocked. I am serious about this, I shop at Wal-mart all the time and it is unfair for them to raise prices at their new store.

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