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Walmart aims to keep a new batch of customers

Tuesday, June 23, 2009 | 6:35 p.m. CDT; updated 9:53 p.m. CDT, Tuesday, June 23, 2009

The recession steered a new type of customer to Walmart — 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 Walmart 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 Walmart 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 Walmart 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 Walmart, 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.

Walmart says that's no accident. It's placing a big bet on the redesign of most of its 3,600 stores, a project 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 Walmart 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 (Walmart) 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 Walmart, 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 attract 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 Walmart to pick up a bungee cord but says he rarely shops there.

Stock in Walmart 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 such as Macy's Inc. and Williams Sonoma Inc., which investors think don't have much further to fall.

Walmart, 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 percent 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.

Walmart 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 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 Walmart'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, Walmart 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 cafe, 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 Walmart. "I basically buy everything there," she said.

 


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Comments

Charles Dudley Jr June 23, 2009 | 7:54 p.m.

In one word "SprawlMart".

(Report Comment)
John Schultz June 24, 2009 | 8:25 a.m.

Sounds like capitalism to me, giving the consumer what they want.

(Report Comment)
Charles Dudley Jr June 24, 2009 | 12:25 p.m.

>>> John Schultz June 24, 2009 | 8:25 a.m.
Sounds like capitalism to me, giving the consumer what they want. <<<

Ya put the little man out of business.

http://www.youtube.com/watch?v=_Lj6PMv68...

Read alot of the comments below the video.

(Report Comment)
John Schultz June 24, 2009 | 12:37 p.m.

Sorry, I don't follow your or Ray's YouTube links unless you want to expand on the content and just why I should spend my valuable time watching it.

Was Sam Walton never the little man?

(Report Comment)
Charles Dudley Jr June 24, 2009 | 12:55 p.m.

If Sam Walton were alive today he would roll over and die all over again seeing how Sprawl Mart has ruined other small mom and pop businesses.

Ya too bad you do not follow the links but then again you might have to sit down and agree with real honest grass roots points of view wouldn't you.

I think John that is what bothers you the most is ray shapiro is from the East Coast and myself I am from the West coast but some how we have met here in the Midwest bringing with us the best of both worlds and our great grass roots views of looking at things which is something alot here in this area do not know how to do.

(Report Comment)
Ray Shapiro June 24, 2009 | 1:12 p.m.

@CD:
("If Sam Walton were alive today he would roll over and die all over again seeing how Sprawl Mart has ruined other small mom and pop businesses.")
Reading some stuff about Mr. Walton's demeanor, I'd have to agree with this.

(Report Comment)
John Schultz June 24, 2009 | 1:12 p.m.

Nope, what bothers me most is people who think they are always right and won't listen to input from other people (and yes, that may apply to me). I couldn't care less where you and Ray are from, but you're not any more grass roots than myself, so please get over yourselves.

(Report Comment)
Ray Shapiro June 24, 2009 | 1:21 p.m.

Hey, now.
I'm a man who lives by his opinions.
(Although my opinions can be changed.)
And yes, sometimes my blond roots show through.

(Report Comment)
Charles Dudley Jr June 24, 2009 | 2:27 p.m.

>>> ray shapiro June 24, 2009 | 1:21 p.m.Hey, now.
I'm a man who lives by his opinions.
(Although my opinions can be changed.) <<<

100% agree although actions speak louder than words to me and lots of times I see very little action when it comes to Libertarians actually coming up with the plans to back their forever resounding solutions they try to present.

It smells too much like passing the buck for failure to think IMHO.

(Report Comment)
John Schultz June 24, 2009 | 2:40 p.m.

Hmm, not sure what the difference between plans and solutions might be Chuck, nor which Libertarian solutions you may have actually read. At least I'm not being the sheep you always complain about.

(Report Comment)
Charles Dudley Jr June 24, 2009 | 4:04 p.m.

John Schultz but you propose all of these be done but do not follow through with the actual hands on how too or proper future maintenance plans to keep it all totally functional.

The only thing you spout here is privatize and privatize some more.

Often times your ideas come across worse than a Meth Addict with severe ADHD looking to reinvent the Rubix Cube because you believe that the colors are mismatched from the factory even though all of the colors are set up correctly.

(Report Comment)
John Schultz June 24, 2009 | 4:12 p.m.

There you go again, into Chuckles mode. Remind me again why anyone should help out the Adaptive Recreation Program with people like you denigrating any alternative solutions?

(Report Comment)
Charles Dudley Jr June 24, 2009 | 4:53 p.m.

John Schultz only when you remind all of us why anybody would vote Libertarian when you constantly fail as a party to actually come up with "solid ideas and long term solutions" to the issues we all face.

Once again all you do is scream privatize from the yard arm of the sinking ship yet only blow little whisps of hot air that could hardly float a paper airplane on a still day.

(Report Comment)
John Schultz June 24, 2009 | 5:16 p.m.

To paraphrase Lightning McQueen once again "Oh whatever, Chuck." Sheesh!

(Report Comment)

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