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BOSTON — By this point, Wal-Mart’s trendy new Metro 7 label should have been selling in a thousand stores, but it has reached only 860 doors. Why? Because the retailer can’t keep up with the demand.
“We’re now trying to catch up with the merchandise flow,” Lucy Cindric, senior vice president of ladies apparel, accessories and intimate apparel for Wal-Mart Stores U.S., said in an exclusive interview. “We have had tremendous success turning through merchandise.”
The designers on the runways of Bryant Park and elsewhere in New York this week — many of whom few people have heard of beyond the tents — represent a sliver of the fashion world. Wal-Mart’s success with Metro 7 is its mega side. The retailer declined to give sales figures for Metro 7, but vendor sources estimate the brand could do $200 million, even with limited distribution, in its first 12 months. The bulk of Metro 7 sportswear retails between $12 and $25, with the highest-priced item being a trenchcoat for $32.94
At times, sales of Metro 7 have exceeded three times initial projections for an item. In April, the Bentonville, Ark., retailer will launch shoes, accessories and costume jewelry under the Metro 7 label. By September, it plans to have Metro 7 in 1,500 stores, or roughly half of all domestic Wal-Marts.
If everything continues to click, the retailer aims to turn Metro 7 into a lifestyle brand à la George, its U.K. import, with lingerie, home and then possibly men’s and children’s apparel.
Metro 7 marks a big moment for the $285 billion retailer. Put in company lingo, “Gracie” is “crossing the aisle” to buy the collection.
“Gracie” is the retailer’s internal name for an important 25- to 45-year-old female customer, who is finally wheeling her grocery cart over to shop for apparel. That long-sought development is potentially very good news for Wal-Mart’s future profits and growth.
“All of our data signals we got who we were after, and we are finally serving that customer who has been in our stores all along,” said Karen Stuckey, senior vice president and general merchandise manager of Wal-Mart product development for apparel, home, hardlines and specialty. “Metro 7 is validation to move on.…There are exciting things to come in apparel.”
According to company research, Gracie lives in a metro area and avidly follows fashion, but has never found Wal-Mart’s style tempting. Her store receipts used to be a boring read: a gallon of milk, paper towels, pet food, etc. Wal-Mart makes only a sliver of profit off those items.
Since the launch of Metro 7 in October, though, Gracie’s receipts have gotten livelier — and more lucrative.
“We see her buying multiple colors of [Metro 7] items in the same styles, which indicates a purchase for self, and we see her buying entire outfits, exactly as they are shown on the rack,” observed Cindric. “We see her [sales] ring is significantly higher than average in apparel.”
Gracie is also buying more electronics, a category the company has recently remade with higher-priced plasma TVs and more elegant displays.
Both developments are bright spots for Wal-Mart’s $191 billion domestic stores division, which is coming off one of its toughest years, including its second quarterly earnings miss in corporate history.
Cindric believes Gracie represents new apparel sales for Wal-Mart because she is only buying Metro 7 and no other clothing.
Her receipts look very different from Wal-Mart’s core apparel customer, who purchases a T-shirt for herself while out to pick up a pack of socks for her husband and play-clothes for the kids.
Unlike Gracie, Wal-Mart’s traditional apparel customer (internally called “Norma”) does not spend a lot of her disposable income on her own wardrobe. Gracie is not necessarily more affluent than Norma, Stuckey pointed out, but she consistently devotes a bigger portion of her budget to fashion.
Convincing customers like Gracie to spend more is crucial to Wal-Mart because the retailer doesn’t have many new U.S. shoppers left to attract. By its own estimation, 87 percent of U.S. households already shop Wal-Mart, either regularly or selectively. (The remaining 13 percent Wal-Mart believes are skeptics actively opposed to the company and/or true luxury consumers.)
Wal-Mart chief marketing officer John Fleming has said growth will come primarily from turning those selective users into bigger spenders. Last October, Fleming told WWD he believed George, the company’s flagship softgoods brand, would be more successful positioned adjacent to Metro 7.
Some evidence suggests Fleming’s theory might be correct.
George is coming off a “record year in female apparel,” Cindric said. “Prior to Metro 7, we maybe overreached in George because we had to cover so many different customers. Now we’re focused around a modern, classic customer.”
George will still occupy the best position in the apparel department, directly along the wide aisle that bisects the food and general merchandise sides of Supercenters. Metro 7 sits next to George, at the front of the department and parallel to the cash registers. Metro 7 will grow from six racks, on average, to nine racks per store.
The collection is also significant because it is Wal-Mart’s first major experiment in letting data drive a fashion launch. Gracie was identified and profiled in part through Wal-Mart’s mathematical analysis of millions of sales transactions. “Truly, this is the science that balances the design development and the merchandising,” said Cindric.
Metro 7 is only the first step in targeted, data-driven initiatives to help Wal-Mart win over its selective shoppers, some of whom are Gracies and some of whom have other profiles and needs. That’s important as the company expands into urban areas where land is at a premium and where size-restrictive building ordinances are more prevalent. Wal-Mart no longer always has the luxury of building a 187,000-square-foot Supercenter and heaping everything in. Expanding into urban centers with smaller stores is a key strategy for the company as it aims to open 1,500 more units in the U.S.
Despite its statistical genesis, Metro 7 isn’t formulaic fashion. Wal-Mart has widened its creative and collaborative processes to an unprecedented degree, encouraging the Bentonville-based merchant teams to work with the retailer’s Manhattan-based product development and trend direction ones. Key vendors of Metro 7 also offer guidance.
But perhaps the biggest change is that, culturally, Wal-Mart has begun to operate more like a fashion company. It has opened a New York design office, and is now willing to schmooze editors with freebies.
That in itself is a revolutionary act for a company that makes visitors to its dingy, Bentonville headquarters buy their own coffee. The company delivered goodie bags, including a Metro 7 trench and beaded tank, a Starbucks gift card and chocolates, to fashion editors invited to a presentation of the spring-summer collection. And in a further indication of Wal-Mart’s increasing awareness of the fashion world, that presentation takes place today — right in the middle of New York Fashion Week.
It also is continuing to advertise in Vogue. Brand spokesmodel and former Miss Universe Dayanara Torres will be back for another four-page spread in the April issue. During the retailer’s Kansas City managers’ meetings in January, Cindric and Stuckey spent an entire day coaching 55 district fashion merchandisers, a new position, on the trend nuances of Metro 7 and how to properly display it in stores.
But the collection has its skeptics. Marshal Cohen, chief industry analyst for Port Washington, N.Y.-based NPD Group, said Metro 7 has indeed wowed a Wal-Mart customer base — but it’s not 25- to 45-year-old “Gracie.”
Based on consumer interviews during store visits, he said 15- to 21-year-olds, shopping with mom, are the end users of the trendy, body-conscious line. If Wal-Mart executives are relying on sales receipts for primary evidence, they may be picking up mom’s purchases for her daughter.
“This is a classic case of executives thinking they have one thing but they’re really getting another,” he said. “Have they stood on the floor and looked at who is shopping there? No one 40 years old in their right mind is touching it. They are too big. The fit is wrong. The reality is the Wal-Mart customer is bigger than average, even the younger customer.”
He foresees potholes with a broader rollout of the label. “No question they are going to have missteps because they are representing it to one market, while connecting with another,” Cohen said.
Regardless of the final customer, the launch of Metro 7 represents cultural change for Wal-Mart at warp speed — and could be a harbinger of its strategy in the years ahead as it focuses on attracting a broader range of customers. In fact, the Metro 7 launch came in eight months, from drafting table to sales floor, said Stuckey.
Stuckey, who shuttles regularly between New York and Bentonville, said the company holds each season open as long as possible, to pick up late-breaking trends. “If there is any big news at fashion week, we can have get it into our early holiday assortments, which are not finalized yet,” she said.
As a result, the retailer’s floaty, boho-seventies tops, prevalent this spring, will give way to cleaned-up silhouettes for summer. There are knee-length, fitted cargo shorts, Bermudas, flowy gauchos, a pleat-front balloon skirt, puckered camisoles and draping, Grecian tops.
“The bling-y nature of product is easing, but we will still do some shine, shimmer and luster, which this customer loves,” said Stuckey.
It has pumped out more clingy, beaded camisoles and embellished denim, which have been star performers. The structured career category, which included looks such as a velvet blazer, has shown less promise.
Overall, tops have sold better than bottoms. “It is an easier point of entry [for a customer] to pick up a top and not have to try it on,” noted Stuckey. “We think this customer needs to learn her fit.”
Metro 7 is deliberately body conscious, a departure from Wal-Mart’s typically generous sizing.
The design of accessories, shoes, and costume jewelry has been closely coordinated to sportswear, although each category will be placed in respective store departments rather than grouped together. Cindric and Stuckey hope that pictures of Torres wearing accessorized Metro 7 outfits on the sportswear racks will prompt customers to investigate where they can find the belt, shoes or jewelry.
“We know [the customer] uses the imagery as a guide,” said Stuckey. “We’ve overheard her asking where she can get the other pieces.”
Pricing for the three new categories is on par with George, said Stuckey, in the company’s “premium” range.
Jewelry includes chunky, beaded necklaces; longer, linked ropes suitable for layering, and teardrop styles. There are hammered earrings, beaded hoops, teardrop dangles, and stack, cuff and link bracelets. Prices range from $7.92 to $19.92.
For the April launch, there will be a single fixture holding belts and three styles of handbags, priced $17.96 to $19.98 for an oversized, buckled hobo, a flap-front satchel and/or a medium satchel with a front lock. There will be a mix of materials on the bags, but the color palette will be relatively neutral: black, white, camel and brown.
In shoes, there are 13 styles ($14.92 to $18.92), with the emphasis on wedges, platforms and strappy sandals. Some will be leather, instead of fabric, vinyl, or other pleather. Part of Metro 7’s brand identity is using premium materials — a silk camisole, for instance, instead of polyester.
Stuckey said Wal-Mart is not looking to use luxury materials as an excuse to raise prices dramatically. “We are not going to be the leading price,” she said. “We would be under our competitors.”
That may have been a reference to rival Target Stores, which has been testing a variety of pricey items, including a $149.99 suede jacket from its new Luella Bartley limited-edition collection. Target — which helped pioneer designer tie-ins in the mass channel with its successful Isaac Mizrahi collection and other, less successful, ones — is clearly a key competitor for Wal-Mart and Metro 7.
So where will Metro 7 go next?
“Our challenge,” Stuckey said, “is to continue to win the hearts and minds of a Gracie.”