Wal Mart's new look: Surviving - and thriving - in a recession

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Wal-Mart (WMT) has always marketed itself to customers who are living from paycheck to paycheck, and the economic downturn has vastly expanded its core audience. As the same high-level consumers who once turned their noses up at the retailer now tentatively creep through its doors, the chain is faced with a difficult -- if exciting -- question: how can it retain its classic bargain-hunter appeal while appealing to its new, upscale clientele? If it can uncover the answer, the company may emerge from the recession stronger than ever.

The first step in Wal-Mart's new strategy lies in adjusting to its new customers is with expanded premium offerings. By offering products from well-regarded companies like Dell, Palm, Apple, Danskin and Kitchen Aid, the chain is hoping to capture the money -- and loyalty -- of its new customers.

A New Look for Old Brands

    What Changed: Pillsbury is going for more soothing tones in these tough economic times with its first re-branding campaign in years. The Pillsbury Dough Boy is still around, but the focus is on happy families gathering around a table of tasty food.

    Paul Sakuma, AP

    What changed: Little girls have been inundated with Disney princess paraphernalia for years now, and the line has been so popular that the company wants to try to do the same thing with fairies. Tinker Bell, a mere side character in J.M. Barrie's 1911 novel and the 1953 movie version of Peter Pan, is going to soon be a leading lady. A straight-to-DVD movie, Tinker Bell, comes out October 28, and that will be followed by a line of books, toys, lip gloss and stationary. The new line could mean big bucks as Tink already brings in about $800 million in retail sales for existing products.

    AP | Disney

    What changed: Pepsi has unveiled its fifth new logo in 2 decades, right, as part of a new plan to redefine itself as a cultural leader. The redesigned Pepsi packages should hit store shelves early next year. Mountain Dew and Sierra Mist drinks will also get a new look.

    AP / Pepsico

    What changed: For the first time, Long John Silver's will be offering its first non-fried items. The Freshside Grille selections includePacific Salmon (pictured), Shrimp Scampi and Tilapia.

    YUM! / AP

    What changed: The national restaurant chain went through a drastic decor makeover in 2008 to make the furnishings more upscale and sleek from its former look with Tiffany-style lamps and antiques. Total cost? $65 million. When the company got to the last of its locations, it staged a mock explosion, blowing up the interior and replaying the action on YouTube. Now all 600 locations of the 36-year-old chain have a modern look with black awnings outside and black-and-white checked tablecloths inside, plus a new straightforward logo.

    RubyTuesday.com

    What changed: Popeye's is sporting a new look with an orange and red logo with the words "Louisiana Kitchen" set off by fleur-de-lis designs and a giant "P" in the middle – the better to emphasize the almost 40-year-old chain's New Orleans roots. Gone is the blue-bordered logo that the company deemed not fancy enough to go after the upscale audience it seeks to court. The logo makeover comes in conjunction with a new $1.49 menu that will include a loaded chicken wrap, the delta mini sandwich and a chicken biscuit. New commercials will feature a fictional chef named Ed, who sits with diners and talks about his food.

    Popeyes

    What changed: Chex Party Mix, invented in 1955, will get a makeover with new recipes, new packaging and a new spokeschef, Katie Lee Joel, (pictured in the center, with Suzanne M. Grimes, president, Food & Entertaining at Readers Digest on the right and Cheri Olerud, senior cookbook editor and test kitchen expert for Chex cereal on the left.

    Business Wire

    What changed: The venerable crock pot, long a staple of the American kitchen, is trying to become the ultimate multi-tasker for the contemporary two-income family that wants to eat healthy. Crock Pot's owner, Jarden Consumer Solutions, wants the slow cooker to become a "trophy" product that people want to give as gifts and buy for themselves. So new cookers will come in bright colors – no more cream and burgundy – and will feature updated packaging that evokes savory root vegetables rather than grandma's quilt.

    Crock-Pot | Hughes Design Group

    What changed: The 400-location hotel worldwide hotel chain is in the middle of a $1.7 billion project to renovate about half its U.S. hotels. The new look includes brighter colors in the room, with pillowtop beds and white duvets and flat-screen TVs. Sheraton is rolling out a branded line of toiletries, called Shine by Bliss, and fitness centers will get upgrades. Lobbies will feature restaurants, most with a casual dining chain called Relish, and cafes with Internet stations. Some locations may also have a steakhouse developed by Shula's.

    AP

    What changed: Now owned by Stride Rite, which re-acquired the rights to the sneaker brand from hip-hop mogul Damon Dash (a recent foreclosure victim), PRO-Keds are going to get a makeover as they come back into the fold. Stride Rite will focus on classic styles, such as the "Royal" canvas basketball shoe, first introduced in 1949, and give it an overhaul that will hit stores in November and retail for $50 to $80.

    ProKeds.com



Wal-Mart has also begun to explore co-branding with top-end apparel designers. The forthcoming Miley Cyrus/Max Azria clothing line links Cyrus, one of the company's best sellers, to noted fashion designer Azria. While Cyrus is comfortable for older customers, Azria is attractive to the new, affluent ones. The entire line of women's tops, pants, shoes, tees and fashion accessories will max out at $20 per item, which is a little high for Wal-Mart's current audience, but cheap for its new customers.

Perhaps the biggest change is in the look of the store. Wal-Mart's high, narrow aisles have traditionally given the store a look that ranges somewhere between a dark alley and a threatening chasm. However, the retailer has begin to take a note from the premium store handbook. With lower shelves and wider aisles, the company is trying to rid itself of the warehouse-store look. Added to this, Wal-Mart is also focusing on presentation, prominently displaying premium brands, highlighting bright colors, and encouraging a more hands-on shopping experience. Combined with a push toward greener practices, these moves are clearly intended to make the store more palatable for upscale consumers.

While analysts have noted the company's impressive recessionary performance, Wal-Mart needs to convince its shareholders that its current growth is not a fluke, but rather the harbinger of a promising future. This is not an easy task: while the vast majority of analysts seem to be marking the company as a "buy," many are also suggesting that investors hold or even sell the stock. The question ultimately comes down to whether Wal-Mart is a good long-term purchase, or simply a good recessionary buy.

This cautious perspective has also been echoed in the stock market. While sales at individual Wal-Marts have either stayed stable or risen slightly over last year, its primary competitor, Target (TGT), has experienced a slight decline. On the other hand, Target's stock has risen by 19 percent, while Wal-Mart's has dropped by 9.3 percent. It seems likely that this disconnect between in-store and stock market performance derives from Target's reputation as a rich-man's Wal-Mart where home furnishings are cheap, but not chintzy, and even discriminating consumers can find pleasing products. However, given Target's lackluster sales performance, it is clear that this is one area in which perception and reality are sorely out of whack.

Wal-Mart is no longer releasing sales data, but its recent figures far outstripped the sales of its fellow big-box retailers. In fact, the company has announced plans to hire over 22,000 new workers this year. In the current environment, many workers who once might have turned up their noses at these positions will be in line for them. Further, it is working on expanding into India, with fifteen wholesale stores opening in the next year.

Ultimately, Wal-Mart is walking a tightrope, simultaneously positioning itself for upscale consumers while trying to avoid alienating its long-term, core customer base. To the store's credit, however, it seems to be navigating this difficult space amazingly well. While some analysts are unsure of the company's future, there are a few vital things to keep in mind. First, the recession will not end overnight: even in the best case scenario, recovery will be slow and gradual, a process that will benefit Wal-Mart's current strategy. Second, when the recession does end, there is every reason to expect that many Americans will be slow to return to their former spending habits. Finally, for all its myriad weaknesses, Wal-Mart is eminently flexible. The retailer has spent years perfecting its ability to anticipate and adjust to the desires of its customers. Now that a recession has brought a new demographic in the door, there is every reason to expect that Wal-Mart will find a way to keep them there.

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