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NEW YORK — With its image firmly etched in the consumer consciousness, Wal-Mart Stores Inc. has become more than the world’s largest company.

Its SuperCenters are modern-day Main Streets, with all the requisite stores and services of a downtown shopping district. With a $4.5 billion cash nest egg and outsized ambitions, the company is poised to make significant acquisitions and launch any number of new retail concepts.

This story first appeared in the August 21, 2003 issue of WWD. Subscribe Today.

Wal-Mart is also a barometer of the national economy. During a recent roundtable discussion about the economy led by Chris Matthews on CNBC, Maria Bartiromo, another of the network’s hosts, advised viewers to “get back into the stock market. Buy the blue chips, buy Wal-Mart.”

To the extent that a majority of the population shops at Wal-Mart, the world’s largest retailer is one of the best gauges of the country’s economic temperature, Bartiromo added.

She’s hardly the first person to suggest a Wal-Mart index.

“Given the degree that our collective economic health relies more on the insatiable American consumer than on the declining American manufacturer, does it make sense to consider Wal-Mart as today’s best economic proxy?” Daniel Gross, author of “Bull Run: Wall Street, the Democrats, and the New Politics of Personal Finance,” wrote on in June.

More people shop at Wal-Mart every week than at any other store. The company’s revenues — $245 billion in 2002 — constitute close to 2.5 percent of America’s gross national product.

Lee Scott, Wal-Mart Stores Inc. president and chief executive officer, told an audience at the company’s annual meeting in June that sales in stores open at least a year typically increase between 3 percent and 4 percent. If Wal-Mart expands its square footage by 8 percent as planned, sales will increase by $25 billion to $27 billion, he said.

At the same meeting, international division head John Menzer was upfront about the company’s global ambitions: “Today, the U.S. represents 37 percent of the gross national product of the world. That leaves 63 percent to focus on our international growth opportunities.”

Wal-Mart is said to be the largest customer for consumer product giants such as the Walt Disney Co., Procter & Gamble, Kraft and Revlon. It is also the country’s biggest seller of clothing, jewelry, diamonds, books, CDs, DVDs, groceries, toys and sporting goods, among other things, effectively beating category killers such as Barnes & Noble and Toys “R” Us at their own games. It’s expanding its furniture departments and inflicting a whole lot of hurt on electronics chains.

The Bentonville, Ark.-based giant is the country’s biggest property developer, with 550-million-square-feet of selling space in 2002, according to Therese Byrne, publisher of Retail Maxim.

“With a real estate portfolio that represents an estimated 3 percent of the world’s total retail space, Wal-Mart isn’t even at its halfway mark on store count,” Byrne estimated. “Given its global reach, it could easily double its square footage in five years.”

A Wal-Mart index may be premature, but not much. The company continues to outperform other retailers and is constantly testing new formats, upgrading systems and technology to facilitate product delivery to its stores and reaching out to more segments of the population.

SuperCenters have become communities unto themselves, the town squares of our time. There’s the dry cleaner, bank, travel agent, nail salon, tanning salon, McDonald’s, gas station, cell phone dealer, optometrist and video store. Add real estate broker if Wal-Mart gets into the residential real estate business, as it aspires to, according to reports.

Malls, which were previously the town squares, are losing their grip on customers, as the economy stubbornly resists a full-blown recovery and department store anchors continue to struggle.

Federated Department Stores, Inc. reported a 0.5 percent drop in total sales for the four weeks ended Aug. 2 compared with the same period last year. Target Corp.’s overall sales have been slowed by continuing problems at its Mervyn’s and Marshall Field’s divisions, and May Co. recently announced it would close 32 underperforming Lord & Taylor stores.

New brands such as Sony are drawing middle and higher-end consumers to Wal-Mart. Once in a SuperCenter, it’s not long before they buy apparel, although initially it may be for their children.

“One-third of all consumers buying children’s clothing, buy it most often at Wal-Mart,” said Lois Huff, senior vice president of Retail Forward. “One in every four people buying women’s, men’s and teen casual clothing, purchase it most often at Wal-Mart.”

“This is a warning to the apparel industry that all the marketing money is being spent on the runway and little is being spent on real Americans,” said Paco Underhill, founder and managing director of Envirosell, a testing firm for stores and banks. “People are going to Wal-Mart, Target, Labels for Less.”

Target’s Super Target stores are becoming increasingly gentrified. If a coffee bar is a sign of a neighborhood’s upward mobility, then Target is movin’ on up. The chain is bringing to its stores Starbucks stands, those harbingers of rent increases and Gap units. Only at Target, Starbucks gives the chain a caffeine-powered hit of cachet.

A new advertising campaign for Isaac Mizrahi’s apparel collection for Target carries the tag line: “Where does New York’s 5th Avenue meet Main Street, USA? Isaac Mizrahi at Target. Luxury for Every Woman Everywhere.” The company in September will open a temporary store at Rockefeller Center here to sell Mizrahi’s line.

Some Target ads and billboards feature model Shalom Harlow, who starred in Mizrahi ad campaigns when he was designing luxury clothes at luxury prices. Of course, Target sells other products aimed at thrifty design snobs such as Michael Graves custom outdoor pavilions and $1,699 Weber grills.

A Wal-Mart spokesman said the chain is also taking many of its cues from the class rather than mass arena. In Pell City, Ala., an example of the ever-evolving SuperCenter, features skylights as part of an indoor lighting system and fixtures similar to those used by specialty stores, cutting down on the harsh fluorescent lighting that makes shoppers feel like suspects undergoing a police interrogation.

The company is catering to more sophisticated apparel consumers with George, a line Wal-Mart inherited when it bought the U.K. supermarket chain Asda. As reported, freestanding stores for the apparel brand are on trial in the U.K. (See story, opposite page.)

“Wal-Mart already owns the low-income shopper and is now increasing its penetration among middle-market families,” Huff said.

On the other hand, Wal-Mart isn’t forsaking its core customer. A dollar-store format is being tested in 17 stores in the U.S., the spokesman said.

There’s evidence that more affluent consumers are buying into the low-price, no-frills world of dollar stores. “Dollar stores have penetrated the middle-income customer and are starting to penetrate upper-income shoppers with households that have three or four children,” said Candace Corlett, a partner in WSL Strategic Retail. “They’ve made enormous inroads. The dollar stores are a threat to Wal-Mart. They’ll never have the selection of a Wal-Mart, but part of their charm is that it’s very easy to get in and out quickly.”

Of course, Wal-Mart attempts to squash any retail sector deemed a threat, and analysts predict that freestanding dollar stores may not be far off. “We’re always testing different concepts and always experimenting with stores-within-a-store,” said the Wal-Mart spokesman. “We have Kids Candy Connections and Mary Kate and Ashley in-store clothing shops.”

The retailer leases vestibule space in its SuperCenters to portrait studios and other service providers. “There are some one- and two-offs, such as Hometown Threads embroidery studios,” the spokesman said.

New product categories for the company include recreational vehicles, appliances, and modular homes. Personal business centers in several SuperCenters offer copy services, FedEx, United Parcel Service and U.S. Postal Service shipping, money orders, express bill payments and electronic fund transfers.

“We’re testing paycheck cashing services in about 200 stores,” the spokesman said. It’s easy to see why. Tax rebate checks sent out as part of President Bush’s economic stimulus plan helped boost Wal-Mart’s sales in July.

“We only had a window of five days between the day the tax checks were mailed to the day we reported our July sales,” he explained. “Of the checks that were cashed in our stores, an average of 15 percent of the check amount was spent at Wal-Mart.”

It’s no secret that Wal-Mart wants to rule the world. The company continues to acquire foreign chains such as Asda with a voraciousness worthy of a yellow Pac-Man blob and is building a distribution center in Spain, with the goal of becoming a major Continental player.

Wal-Mart’s first store in Beijing, which opened in July, was a turning point. The company, which already had 22 stores in China, waited until it had a better understanding of the market before venturing into Beijing. It now plans to open two more stores in the city.

However, Wal-Mart’s entrance into Germany in 1998 has been disappointing. The company has said it’s stemming losses, but the move may have delayed debuts elsewhere in Europe.

“Wal-Mart needs a French presence,” said Huff. “In Europe you buy, you don’t build.”

International is testing new shoe departments and online home delivery services. Walmex, the largest international division, with 610 stores in Mexico, inherited six different retail formats when it acquired Cifra. The stores cater to the different income segments with restaurants and department stores.

The company is in an enviable financial position. In May, it concluded the sale of its McLane food distribution network to Berkshire-Hathaway for $1.5 billion. As of July, Wal-Mart had current assets, cash and cash equivalents of $4.5 billion.

“The company is getting into the convenience store business more aggressively,” said Huff. “Dollar stores are still a viable format. If you think of what’s within their boxes, there are a lot of things that make sense as standalone concepts. Wal-Mart is the third-largest drugstore retailer. They may do some twist on home health care or something for the aging population. Some of the money will go toward opportunities in Japan.

“They are trying lots of different ways to leverage the brand,” Huff added. “Will Wal-Mart fly the friendly skies? They have the clout and cash to enter into some interesting ventures, including businesses outside its core.”

A Wal-Mart airline may sound farfetched, but with a fleet of aircraft conveying managers around the U.S. and overseas, Wal-Mart reportedly logs as many miles as a mid-sized commercial airline.

The company continues its march into urban areas with SuperCenters in several top cities, and plans to move into Chicago in 2005. The Wal-Mart spokesman downplayed the urban initiative, saying, “We continue to grow all over.”

The retailer is covering all its customer bases. “Wal-Mart is changing its definition from ‘We sell value products,’ and partnering with consumers and saying, ‘We’ll bring you the good life wherever you need it,’” Huff said.

That includes giving shoppers more options for buying products from home. In addition to traditional e-tail sites for Wal-Mart and Sam’s, the latter operates an online auction.

On any given day the site sells Movado watches; DKNY bracelets, for $5; Giorgio Armani slim fit jeans, regularly $250, bid down to $11; Hugo Boss sunglasses and handpainted vintage denim jackets. Deals on a recent day included a yellow sapphire and diamond ring, regularly priced at $1,300, for $35.

The auction site could be yet another test for the retailer. Wal-Mart may want to replicate the success of eBay, although a parallel universe with two sets of pricing could upset suppliers. Yet Wal-Mart’s access to products is unmatched. The company moves so much merch that manufacturers bend over backwards to stay in its good graces.

The Sam’s site has an interesting inventory of designer clothing and jewelry. “A lot of people have said Wal-Mart is not a factor in apparel,” said Huff. “If they get it right, it’s going to be devastating.”

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