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Fixing Wal-Mart Apparel: Retail Giant’s Trend Team Searches for Elusive Mix

Wal-Mart's first trend office in Manhattan's Garment District, opened almost two years ago, is indicative of its desire to change its fashion image.

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BOSTON — When Wal-Mart opened its first trend office in Manhattan’s Garment District almost two years ago, Lisa Waltuch got rare permission from the company to customize the space.

The new trend director, with the help of a designer friend, switched the retailer’s standard grayish paint to a warm white, painted bulletin boards and shelves a zingy orange, and hit furniture chain Design Within Reach for a few Philippe Starck stools and a planter for the conference room. They even found a hip way to display company founder Sam Walton’s maxims — de rigeur in Wal-Mart offices — through vinyl typography on the walls.

The trend office space is, in essence, Wal-Mart’s brand interpreted in contemporary style. That’s the sensibility Waltuch and Celia Clancy, vice president of strategy for apparel and home product development, want to bring to the clothing.

“We wanted it to have a design sensibility while still staying true to Wal-Mart’s discount identity,” Waltuch said.

Wal-Mart Stores Inc. has been trying to fix apparel, in one form or another, for a decade. The world’s largest clothing retailer has struggled to balance its stable sellers with enough new styles, and to create presentations that were low priced but didn’t look cheap. Rival Target Corp. has been lauded for a snappy sensibility that extends from apparel to home decor. For the past 17 consecutive months, same-store sales of Target have outpaced Wal-Mart (not including Sam’s Club).

The trend office is on the vanguard of Wal-Mart’s attempt to change.

“At Wal-Mart, we must have the courage to be contemporary,” is the mantra from Claire Watts, executive vice president for apparel, home and product development. She oversees the trend office and has been one of its important backers.

“We should be right in step with Gap and American Eagle,” said Waltuch, describing the Bentonville, Ark.-based retailer’s aspirations to serve up “fashion basics” that capture the essence of each season.

Clancy described the office’s role as “looking at everything from blue-sky proposals on how to positively impact the shopping experience to new brand launches to how we stand for items in the middle of the fashion pyramid.”

This story first appeared in the August 1, 2005 issue of WWD.  Subscribe Today.

Driven by trend office research, the $285 billion retailer is organizing its private label brands around consumer lifestyles instead of a price-dictated “good, better, best” arrangement. The goal is to reduce duplication among the lowest-priced items and free up floor space for new properties.

Analysis of internal data has allowed Wal-Mart to profile customers it could serve better. One such consumer is a “fast misses'” shopper, a style-seeking woman over age 25 that the retailer believes is hungry for updated merchandise. It also wants to whittle down lead time — now six months — and bolster contemporary careerwear label George by working directly with the U.K.-based George Global design team.

The need to get apparel right has only intensified. Pressured by rising fuel costs and stagnant general merchandise sales, Wal-Mart this year missed its first-quarter earnings, something that has happened only one other time in its history. The retailer’s U.S. store division’s June results, showed a 4.6 percent comp store sales gain, a marked improvement, but the result was bettered by Target’s 9 percent comp-store increase. The rival’s success has reverberated throughout Wal-Mart.

“I haven’t been in a Target store for about the last three hours,” Michael Duke, Wal-Mart Stores president and chief executive officer, joked at a William Blair analysts conference on June 21 when asked if he paid attention to the competition.

Clancy and Waltuch have adopted Target’s parlance, speaking about creating a unified design perspective and products that satisfy “wants and needs.”

Target uses in-store signs that identify “wants” (discretionary purchases such as handbags) and “needs” (commodities such as paper towels).

“They were obsessed with Kohl’s for a while, and now they’re looking hard at Target, because Target is enjoying stronger comp-store sales increases compared to them,” said Richard Hastings, a retail analyst with Bernard Sands.

A.G. Edwards analyst Bob Buchanan said Wal-Mart has been “decidedly dull on the sales floor. They’ve been losing customers to Target, and it’s tough to get them back.”

The trend office on Fifth Avenue, near the Empire State Building, is crucial for Wal-Mart to compete with Target in apparel. Opened in October 2003, it is a symbol of the retailer’s commitment to understanding and being a long-term player in fashion.

The company is shifting from “being Bentonville-centric,” said Clancy, a Boston native with a bachelor’s degree from Wellesley College. “Slowly but surely, we’re opening up and getting voices in important, strategic areas.”

Steven Hoch, director of the Jay H. Baker retailing initiative at the University of Pennsylvania’s Wharton School of Business, sees the trend office as a smart defensive move.

“They are fighting an uphill battle because of the ubiquity of their locations, their demographics and because of the large amount of apparel they need to sell,” he said. “[Fashion is] a battle by definition they can’t win, but it’s important that Wal-Mart make the managerial and monetary commitment to constantly try to push that big rock.”

But Christian Davies, creative director with Cincinnati-based retail design consultant FRCH, said a trend office can take Wal-Mart only so far.

“If you’re going to credibly sell fashion, having a trend lab in New York is just the tip of the iceberg,” he said. “They are lacking in the store experience — you’re not seeing a seasonal point of view; you’re not seeing reasonable lighting, decent fitting rooms or displays that style outfits.”

In practice, the trend office functions as many others along Seventh Avenue do. Waltuch and consultants travel the world, taking photos and purchasing garments that will inspire styles sold at Wal-Mart.

They create trend storyboards, and kick off each season by hosting the Bentonville product development team. There are more than 200 staffers handling design, fit, packaging and quality control at Wal-Mart’s headquarters, but only a few travel to New York for trend presentations and field trips to iconic retailers such as Henri Bendel.

The difference between Wal-Mart’s trend office and others is one of scale. Each season, Wal-Mart needs to find styles that could appeal to millions of women. About 110 million customers visit a Wal-Mart each week, and nine out of 10 U.S. households shop the retailer annually, according to a recent Smith Barney research note.

“The key is, is it new enough? Is it exciting enough? And is it not so new that we can’t commit to buying a lot?” Clancy said.

Wal-Mart has been burned by being too fashionable. In 2003, Clancy recalled, it took heavy markdowns after puzzling shoppers with embellished khurta tops.

At times, there are communication gaps between Manhattan and Bentonville.

“We suggest things sometimes the buyers are wary of,” said Waltuch, a Stanford University grad who began her Wal-Mart career with the Brisbane, Calif.-based Web team. “We are reinventing our process to be much more understandable. We are specifying which are emerging trends versus other kinds of trends. We are providing a much more focused color card.”

The challenges extend beyond communication. Trends promoted by Waltuch’s team are then reinterpreted by product developers, bought by Wal-Mart’s merchants and funneled through a global sourcing network. It’s a cumbersome process in a business that rewards agility.

For instance, it will take almost three years for the long camisoles Waltuch first spotted on a trend-scouting trip to St. Tropez to make it onto Wal-Mart’s sales floor.

Wal-Mart will have “a smattering of longer lengths” by holiday and a full presence in spring ’06, Waltuch said. Target has already been selling long camisoles since May.

Wal-Mart’s trend team has had successes. This spring its “Gotta Have It” package, which focused on preppy looks, has performed well. In-store, the presentation was bright, pretty and clean.

“The merchants are very pleased,” Clancy said. “The skirt business has been very, very good. We could have had a lot more.”

The office also is considering how to improve the store experience. Wal-Mart has hired regional merchandisers to ensure that apparel displays are properly set up and maintained. It’s the kind of housekeeping that Wal-Mart has typically not spent money on, but cleanliness is one of Duke’s major initiatives to improve comp-store sales.

Remodeled apparel departments, which include simulated wood flooring instead of carpet and a uniform fixture grid, have been well received, said Clancy, who lead the redesign. Since 2003, when the format bowed, about one-third of the stores have been renovated, a Wal-Mart spokeswoman estimated.

“What’s interesting is that the customers perceive the product is higher quality in that setting,” Clancy noted.

Evaluating the trend office’s contribution is difficult. Wal-Mart does not break out its apparel sales, and it closely guards the specifics of its results.

Waltuch said 25 percent of Wal-Mart’s apparel shoppers are spending more this year than they did a year ago, according to internal data. June’s 4.6 percent same-store sales gain in the U.S. store division was led by better performance from general merchandise categories, including apparel.

But it’s unclear whether Wal-Mart has fixed its old bugaboo: persuading women who haven’t bought its apparel to try it.

Mandy Putnam, vice president with Columbus, Ohio-based Retail Forward, said Wal-Mart’s “share of preference”— respondents who listed Wal-Mart as the place they buy most of their clothes — has been stable at about 20 percent this year.

A.G. Edwards’ Buchanan said the success of the trend office rests on its ability to be persuasive with Bentonville. “I think it’s great to have a New York office,” he said. “As long as they listen to what that office is saying.”

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