Discounter edges upscale

Wal-Mart is offering higher-priced goods to lure customers who want a wider selection than the chain's usual offering


BENTONVILLE, Ark. -- With new selections such as Egyptian cotton, 400-thread-count sheets, $1,700 flat-screen televisions and gourmet pickles in many of its stores, Wal-Mart Stores Inc. has begun to step beyond the bargain basement persona that has made it a retail colossus.

But even as it makes these changes, the store is treading a fine line in persuading middle-class consumers to visit more often without abandoning its core price-conscious shoppers.

That theme dominated a media gathering that began here yesterday at the home of the world's largest retailer. The program was designed to make the once-secretive company more open to the public.

Wal-Mart began holding the event, which attracted dozens of reporters from around the world, a year ago to defend itself against negative headlines about its labor and business practices.

And yesterday, several executives firmly denied any speculation that the company was becoming more upscale as it lost market share to Target Corp., which has won over wealthier consumers with its cheap-chic apparel and home fashions, and other competitors.

Earlier this year, Wal-Mart opened a store in Plano, Texas, that offers wine, sushi and 500 gourmet cheeses, selections not found in its typical stores.

"It's not about going upscale. It's about understanding the shopper that's already in our store," said John Fleming, executive vice president of marketing and consumer communications for Wal-Mart.

Fleming said the retailer wants its current customer to visit more often. It's particularly focused on what it calls the "selective shopper," who already shops at Wal-Mart an average of 46 times a year and spends about 28 percent of his or her grocery dollars at the retailer. This shopper is concerned about quality as much as price, Fleming said.

The company's so-called "loyal shoppers," by comparison, visit Wal-Mart 63 times a year and spend 77 percent of their grocery money with the retailer.

To reach out to the selective shopper, Wal-Mart has begun to offer more expensive items. It still sells a six-piece patio set with a table and umbrella for as little as $88, but also offers one for $898. It offers a 15-inch flat- screen TV for as little as $248 as well as a 42-inch version that sells for $1,596.

"We're not abandoning the opening price point," Fleming said.

Wal-Mart has also begun to focus more on fashion, having launched the Metro 7 urban wear clothing line in 860 stores as of January with plans to put it in 1,500 more stores by September. In July, it said it would launch a more trendy line for men.

The retailer has also begun to pay more attention to the diversity of its shopper. It no longer uses the same general advertising in all its markets, and has begun advertising in magazines such as Vogue and ethnic publications.

Wal-Mart has also begun to vary the design of its traditionally blocky stores to fit different communities. In Hawaii, a Sam's Club, Wal-Mart's chain of warehouse stores, is stacked on top of a Wal-Mart, while a store in Naples, Fla., has a fisherman's pier look. Another Wal-Mart, in Middlefield, Ohio, home to a large Amish community, sells blocks of ice for the refrigerator and has a place for hitching horses.

"It's not one size fits all," said Eric Zorn, president of Wal-Mart Realty, the company's real-estate arm.

The company Sam Walton founded as a general store in 1962 has for years been accused of overwhelming small business and smothering main streets. The criticism has swelled as Wal-Mart has moved into more progressive major markets where opponents were better organized.

Wal-Mart was slow in the past to address the criticism, operating under the philosophy that if it gave customers what they wanted, negative publicity wouldn't hurt business. But the company has recently become more pro-active in cultivating its image, partly as it has come under greater political fire and as competition has grown.

Wal-Mart said little yesterday to directly address the criticism that has mounted over its business practices.

The retailer also announced new health initiatives that seemed to have been developed in response to labor union criticism that Wal-Mart doesn't provide affordable coverage to its employees - a point that prompted Maryland lawmakers to pass a law requiring the company to pay more toward that end.

The company said it would decrease co-pays for medications for conditions such as diabetes and hypertension to $3 from $10. It also said it would reduce by half, to 12 months from 24 months, the waiting period for part-time associates to enroll in a health plan. It will also expand its "value plan," which costs $11 per month for individuals and $9 more per month for children, to all its associates. But the deductible for that plan starts at $1,000.

While Wal-Mart remained mostly silent on criticism against it, the governor of Arkansas, Mike Huckabee, vehemently defended the retailer, which is his state's second-largest employer with 46,000 workers. State government is the largest.

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