Wal-Mart shoppers disenchanted

NEW YORK — Wal-Mart Stores Inc. is facing a new reality: Its customers want more than just the lowest price.

The world's largest retailer, which only a few years ago could do no wrong, is now suffering from the kind of problems that have plagued weaker rivals like Kmart: cluttered stores, merchandise that turned off shoppers and poor service. Meanwhile, Target Corp., while some six times smaller than Wal-Mart, is setting a new standard for discount retailing.

Wal-Mart's sales growth has sagged, in part because the retailer, based in Bentonville, Ark., while still a low-price leader, doesn't have products on the floor that attract today's shoppers — particularly in apparel, home furnishings and consumer electronics. It also has a problem with slow checkout service, and its stores look uninspiring.

Target, however, keeps sharpening its appeal to a higher-income customer with affordable fashions and home merchandise from designers including Cynthia Rowley and Isaac Mizrahi. Its stores boast a colorful assortment of merchandise that focuses on the must-haves of the season — this spring, consumers will find such items as turquoise moccasins, slim lace tunics and metallic sandals. Its service at the checkout? Speedy, analysts say.

Howard Davidowitz, chairman of Davidowitz & Associates, a retail consulting and investment banking firm, joined other analysts in saying that rising gasoline prices and job uncertainty have hurt Wal-Mart, prompting lower-income shoppers to spend less at stores. But, he said, "for the past six months they have dropped the ball. The fact is that Wal-Mart has failed to execute as well as they have always done."

Bob Buchanan, a retail analyst with St. Louis-based A.G. Edwards, said, "Wal-Mart is not as crisp in their execution as they have been. Target continues to do a lot better in merchandising."

Buchanan also believes "morale is not as high as it has been" at the company, which has had to defend its business practices from criticism by unions and community activist groups; they contend the retailer takes advantage of workers and hampers competition.

It has also defended itself in highly publicized lawsuits. Wal-Mart recently said it would pay a fine to settle federal charges that underage workers operated dangerous machinery, and it also agreed to pay $11 million to settle charges that its cleaning contractors hired illegal immigrants. Meanwhile, it faces a class action lawsuit by female employees who claim Wal-Mart discriminated against them because of their gender.