NEW YORK — Wal-Mart is poised to jump on an apparel brandwagon.
The destination: The wallets of half of its customers who are mothers, ages 45 and under, with annual household incomes north of $75,000 — women who are not purchasing apparel for themselves at Wal-Mart supercenters, even though they are visiting those stores four times a month on average.
Big-name women’s brands — not necessarily proprietary ones —form a major artery on the retail giant’s road map for its next growth phase, according to “Wal-Mart Apparel: Beyond Basics,” a new report from Columbus, Ohio-based consultant Retail Forward. It’s a route Wal-Mart will need to traverse, if it expects to keep its overall sales growing at the 16 percent compound rate it has achieved for 10 years.
“Levi Strauss Signature will be the test case,” said Mandy Putnam, author of the Wal-Mart report and a Retail Forward vice president specializing in branding and consumer behavior. “It’s Wal-Mart’s first shot over the bow. If they take share from competitors, other brands will jump in. We’ll get an early read as soon as the results of this back-to-school season are tallied.”
Currently, just 6.4 percent of Wal-Mart’s younger, up-market parents are buying women’s apparel for themselves at the supercenters. In fact, these customers are 17 percent less likely than the average U.S. household to buy any of their own apparel at the chain, even though they are 83 percent more likely than average to buy clothes for their children there. (That tendency to purchase children’s clothes makes the group the third most probable to do so, among 18 consumer segments.)
The big question for Wal-Mart, in this regard, is an old one, according to Putnam: Are apparel vendors willing to sell their brands at the low-frill, price-driven supercenters in exchange for the potential volume? Beyond the potential impact on their brand image, risks for labels entering Wal-Mart include the pressure the Bentonville, Ark.-based behemoth would put on the brands’ margins, to keep its own costs low, thus reducing the brands’ budgets for visual merchandising at the stores — even as the discount giant would expect the brands to play an active supporting role.Nevertheless, big brands might be more willing to take a stab than they would have years ago, Putnam suggested, considering the increasing inclination of people to cross-shop, and the willingness of those in their 20s and 30s, including affluent consumers, to buy apparel in virtually any venue, including such retailers as Target and Kohl’s, which didn’t appeal to prior generations of affluent shoppers.
Wal-Mart rocketed to sales of $245 billion in 2002 from sales of $55 billion in 1992, largely on the wings of its food business, which was boosted by the growing number of cross shoppers. In 2002, Wal-Mart’s sales of consumables, which include food, candy, tobacco, pharmacy products and health and beauty items totaled approximately $63 billion, or triple the roughly $20 billion it did in its apparel business.
While Wal-Mart has become America’s biggest grocer, it is also the world’s leading apparel retailer, a standing it has built on selling basics like T-shirts and tube socks, as well as children’s clothes, to customers shopping primarily for consumables and picking up apparel basics, during their visits as a matter of convenience. But when it comes to women’s casual apparel, for instance, only 24 percent of Wal-Mart shoppers say they buy it most often at Wal-Mart.
Keeping its growth engine going will, in part, require reaping more sales of nonconsumables, including apparel, from existing Wal-Mart stores, Putnam observed. Wal-Mart will win or lose this battle in its supercenters as they continue to be its store-growth vehicle. Wal-Mart Supercenters now account for 45 percent, or 1,258 of the chain’s 2,826 doors in the U.S. Those supercenters produce the biggest share of Wal-Mart’s business in consumables, which are the products that spur people to visit the stores frequently.
Although much of the potential in women’s sales is riding on boosting business in its U.S. supercenters, Wal-Mart has plans to expand two of its women’s brands offshore. The $1 billion, Mary-Kate & Ashley brand is slated to be introduced in the U.K., Canada and Puerto Rico, Putnam said, but did not specify the time frame. (For b-t-s in the U.S., it was expanded into juniors’, plus-size girls, toddlers and domestics.) The George brand will be introduced in Japan next spring; recently began testing in Mexico and Canada, and is already on sale in Germany and Puerto Rico, as well as in two pilot stand-alone stores in the U.K., as reported in WWD.The fly in the ointment is that, despite the advantages brought by frequent shopper visits, sourcing and distribution muscle and high customer counts — “sometimes there are more customers in a Wal-Mart than in an entire shopping center,” Putnam noted — Wal-Mart’s women’s apparel has lacked the allure of contemporary, big brands, with Levi Strauss Signature a notable exception. Further, efforts to create excitement with U.K. import George and the celebrity-infused Mary-Kate & Ashley brands so far have been compromised by apparel departments where visual presentations are sub-par compared with the merchandise, as well as by a failure to market the British George brand to American consumers, who remain unfamiliar with it — even though Wal-Mart has sold George since 2001, the same year it became the exclusive distributor of Mary-Kate & Ashley.
Apparel display problems in the supercenters include:
Sight lines that are blocked and aisles that are too tight to effectively promote brands such as Signature, George and Mary-Kate & Ashley.
Limited use of point-of-purchase graphics, even for the launch of new brands, like Signature.
A dearth of vignettes that would serve to draw customers into brand departments.
As a result, women who might buy apparel at Wal-Mart are buying it elsewhere.
“They [Wal-Mart] are not happy they are losing potential business to Kohl’s, Target and J.C. Penney,” Putnam said.Wal-Mart supercenters draw high-income customers shopping for food and other consumables, but they are losing women’s apparel dollars to traditional department stores and off-pricers.
A new apparel presentation is being tested in certain Wal-Mart Supercenters, including units in Osh Kosh, Wis., and Tallahassee, Fla., but the layout, based on a grid system, is only expected to be used in new stores, starting next year, Putnam said. Features of the new layout include roomier aisles; vendor racks replaced with uniform Wal-Mart fixtures in black or bronze finishes, and flooring upgraded to wood grain from gray carpeting.
Then there’s the matter of marketing. Cost-conscious Wal-Mart is unlikely to hike its ad budget above the 0.3 percent of sales it now spends. Target, by comparison, devotes 2.4 percent of its sales to ads. In Putnam’s view, Wal-Mart can overcome this disparity in-store. “They don’t need to attract more customers with advertising, but they do have to let the shoppers in their stores know the apparel brands exist,” she advised. “A lot of the effort to improve the apparel presentation will fall upon the brand manufacturers.”
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