Walmart, the world's largest retailer, is rebranding from a steep discounter to a destination for high-quality, fashionable home goods and clothing. Using low-margin groceries as an attraction, the company is adding more than a dozen new, profitable product lines, including six developed in collaboration with celebrities such as Drew Barrymore and Sofia Vergara.
Walmart is emphasizing national brands in its newly renovated "Stores of the Future", with most goods priced between $15 and $50, a move inspired by the fact that 80% of its customers were purchasing higher-priced clothes elsewhere.
The company's new strategy is to "democratize fashion" by converting its price-conscious shoppers into style-conscious shoppers. This is a major transformation in Walmart's approach to apparel and could pose a threat to smaller retailers who struggle to compete with Walmart's scale, size, and history of reducing supplier costs through volume sales.
Analysts suggest that while this strategy poses a risk to the market, it does not disproportionately affect larger retailers like Target or Gap.
According to GlobalData, Walmart holds 4.6% of the $560.4 billion U.S. apparel market. The company's 'Stores of the Future' initiative is a part of a record $17 billion capital expenditure plan, featuring revamped facilities with snazzier displays for its new clothing and home decor lines. Collaborations with celebrities and designers for exclusive product lines are a key part of this strategy, pioneered by competitor Target.
This shift in strategy comes after Walmart's previous attempts at branching into the fashion industry met with failure, like the acquisitions of upmarket brands Bonobos, ModCloth, and Moosejaw, which were sold off a few years later. Despite past missteps, CFRA research analyst Arun Sundaram believes Walmart's move to capitalize on home decor and clothing makes sense in a slowing economy. Walmart's strategy seems poised to benefit from inventory surpluses at other clothing chains and the bankruptcy of home decor leader Bed Bath and Beyond.
