Although Wal-Mart's apparel will never be confused with a Hot Topic, or even a Delia's, the marketing to teenage girls suggests that the retailer is looking to expand its already considerable apparel sales from basics to some more fashionable areas.
Many critics still joke about Wal-Mart's stores being filled with lots of cheap, unmemorable private sportswear brands, but astute observers of the world's largest retailer say that by utilizing its sophisticated information systems and micromarketing to key demographic groups, Wal-Mart is poised to sell even more apparel.
Amazingly, none of the analysts interviewed for this story could name five Wal-Mart private apparel brands and their corresponding meanings. Most were only able to identify and vaguely define one or two, such as the much-maligned Kathie Lee Gifford assortment or the older Faded Glory brand. "They are poorly defined and kind of mashed together," notes Eric Beder, senior vp/retail analyst at Ladenburg Thalmann in New York. "Kmart has Disney and Sesame Street. Those are no-brainers. The only thing Wal-Mart really develops is low prices."
How right Beder is. Offered at aggressive, everyday low prices, Wal-Mart's garments yield high turns and thus, very few markdowns. Argus Research equity analyst Marie Driscoll says Wal-Mart's sales in apparel and related products totaled about $23 billion last year, a number that represents roughly two-thirds of Kmart's overall store volume. This means that somewhere around 11% of Wal-Mart's total business comes from apparel-even if the clothing would never knock 'em dead on the runways of Milan.
During the December portion of the generally dismal holiday selling season-especially for apparel-Wal-Mart's basic apparel was one of its four strongest categories (the others were electronics, seasonal and toys). Kmart experienced a double-digit decline despite the retailer's talk of emphasizing its higher profile brands like Route 66 and Sesame Street. "The promotional tenor retailers took on this holiday season speaks loudly to its alternative, EDLP, Wal-Mart's clarion call," said an Argus Research report.
Although a New Jersey Wal-Mart featured an assortment of eye-stopping Valentine's Day intimates in February that included Secret Treasures, a liquid-filled bust-enhancing bra, these riskier items make up only about 10% of Wal-Mart's overall assortment in both private and national brands, according to Driscoll. And, the biggest destination departments within apparel continue to be the more conservative areas of ladies' plus sizes and men's work-related clothing.
Jon Ragsdale, vp of marketing and merchandising at Dickies, says that by using a low risk strategy, Wal-Mart will seldom bomb out with an entire clothing line. "They can usually hold pricing at fairly stable and comfortable levels. They do some markdowns, but you won't see a whole category on sale."
Most analysts and suppliers say Wal-Mart could still squeeze more dollars out of this department. The construction of more higher volume supercenters should be one growth factor. Because of the food department, traffic and turns are higher.
Also, Web-based technologies like Retail Link and Velocity, coupled with Wal-Mart's year-old Store of the Community initiative, have removed some of the risks associated with fashion-forward product. Argus' Driscoll believes fashion may now be a bit safer. This has been evidenced by the introduction of two juniors lines, No Boundaries and Organize Your Life. And, the new girls line, Mary-Kate & Ashley, takes more of a fashion stance.
Wal-Mart is offering products that nobody else carries, but which are under the same national brands featured by other mass retailers. Most are not exclusives. Wal-Mart has a need to fill in its assortment or it may have identified a market other retailers have not.
With Just My Size's plus size brand, Wal-Mart carries a wider breadth of product. It also identifies needs by market. This makes Wal-Mart a true destination for the plus size customer. "Wal-Mart is doing a better job than other retailers," notes Katy O'Kennedy, manager brand creative for Sara Lee Casualwear.
Dickies has even developed a line with Wal-Mart's price needs in mind. Genuine Dickies, which is of the same quality as Dickies' traditional workwear, but with fewer bells and whistles, will be in 1,700 stores by summer. While products are available to other accounts, Wal-Mart's size made it feasible for Dickies to develop the line at the retailer's request.
By improving apparel on all these fronts, some observers believe Wal-Mart could grab more dollars from the many consumers who only shop the stores for consumables. "The potential for Wal-Mart's apparel is endless," says Angelo Lagrega, president of VF Jeanswear, mass market. "They already turn merchandise well, but the numbers of people who walk into stores and don't buy apparel or only buy a small percentage is huge. It comes back to what products they showcase and how they customize the assortment."
With or without improvement, observers say Wal-Mart's size already makes it a formidable competitor that is light years ahead of other mass retailers in apparel-even if nobody can tell the difference between the thrusts behind its Puritan and Ozark Trail men's flannel shirts. "So many people walk into the door that they will have sales irregardless," says a private label ladies' supplier.
