Walmart, the largest U.S. retailer, is expanding its fashion business to draw younger shoppers as its sales growth slows. By launching a new fashion brand, it is seen as trying to win back fashion market share ceded to Amazon and boost U.S. sales.
On the 23rd (local time), the Wall Street Journal (WSJ) reported that Walmart plans to launch a new private label called "Scenario," consisting of women's apparel, bags and other accessories, saying, "It is an attempt by Walmart to establish itself as a destination for fashion shopping for more U.S. consumers."
Many Walmart customers now buy groceries at Walmart but purchase clothing from other retailers such as Amazon. According to the WSJ, even customers who buy clothes at Walmart mostly purchase low-priced basics such as T-shirts or leggings, and women who use Walmart's main apparel brands tend to be relatively older. In fashion, Walmart's customer base is effectively limited.
Recently, as spending has slowed, including on its core groceries, Walmart's sales growth has also cooled. On the 20th, Walmart said total sales in the second quarter of the fiscal year (May–July) rose 5.9% from a year earlier, and U.S. same-store sales excluding fuel, a key metric, increased 2.6%. The U.S. same-store sales growth rate was the lowest in six years. It not only slowed from the prior quarter (4.1%) but also missed the market consensus (3.8%).
A significant share of Walmart's sales comes from groceries. But groceries have relatively low margins, making it hard to lift profitability much even when sales rise. By contrast, rival Amazon has expanded its influence in nonfood institutional sectors, including apparel, by leveraging fast delivery on its online platform and a broad assortment. Walmart's push to expand in fashion is seen as a strategy to increase sales of higher-margin nonfood items while reclaiming fashion market share lost to Amazon.
Walmart executives expect a broader fashion assortment to drive sales growth. Denise Incandela, Walmart U.S. senior vice president for fashion institutional sector, said, "We know we are not meeting all of our customers' wardrobe needs," adding, "Data analysis showed customers were satisfied with Walmart's strong value for money but not with style and quality."
Walmart has recently been chasing Amazon by rolling out trendy products not only in fashion but across various categories. Early this year, it introduced home decor and home appliance items that depart from its traditional low-price image, including a $238 ocher velvet swivel chair and a $1,699 De'Longhi espresso machine.
This is not the first time Walmart has strengthened its fashion business. Walmart has traditionally been known for low-priced basics such as inexpensive jeans and multipacks of socks. Over the past decade, it has steadily added more style-forward products, even at somewhat higher prices, to attract customers who prefer Gap, J.Crew and Nordstrom. However, despite pouring in substantial expenses, the results have been considered limited.
The new fashion brand Scenario is set to debut hundreds of items, including an embroidered-sleeve blouse, a pintuck denim shirt and faux leather bags. Marcus Brown, the lead designer for the Scenario line, said he designed Scenario for women around age 35 who prefer trendier looks than those of the existing low-priced women's brand Time and Tru.