Pinch Me -- Is That a Wal-Mart?

The House of Fuddy-Duddy Wants To Be a Trendy-Setter

NEW YORK -- Head south on Fifth Avenue, past the look-but-don't-touch boutiques of Bruno Magli, Salvatore Ferragamo and Henri Bendel, stop at 31st Street and look for a building on the right, between the fast-food restaurant and the souvenir shop.

There, on the sixth floor, sits the only Wal-Mart in Manhattan -- not a store, but offices, a laboratory even, where veterans from Nautica, OshKosh B'Gosh and the West Elm furniture catalogue work, largely in secret, to help the nation's largest retailer earn one designation that has long eluded it:

Hip.

These retail warriors walk the streets of SoHo, notebooks in hand, sneak into boutiques in London and snap photos of teens in Tokyo to divine what's hot. They forecast trends in clothing, home decor and furniture in advance of a season, then transmit the details back to the colleagues in northwest Arkansas who ultimately determine what reaches the shelves of the company's 3,400 stores.

Given its reputation as a juggernaut, it's a curious sensation to consider Wal-Mart's vulnerability. But that is what the two-year-old New York Trend Office is there to address.

With trends in fashion trickling down into everything from toasters to infant clothing, the chain is suddenly worried about missed opportunities. Since its founding in 1962, Sam Walton's brainchild has built its business on the traditional-minded lower-income shopper. This is a customer, judging by Wal-Mart's merchandise, who wants the basics -- a sturdy nightgown, a reliable bathing suit, a six-pack of children's underwear. (Wal-Mart sells one of every two pairs in the United States.)

The discount giant has stuck by that consumer, earning billions in the process. But now it is rethinking things -- placing ads in that fashion bible Vogue; having its TV commercials portray a lifestyle, not just a smiley face rolling back prices; even considering hiring a big-name designer. For it has not escaped the attention of Bentonville, Ark., that the rest of the retail world has discovered a different, more lucrative shopper -- one who craves style for style's sake.

As Wal-Mart upgrades its merchandise to compete with edgier rivals, the staff in the New York office is serving as a hidden but powerful scouting party, watching carefully to ensure that a chain known for missing trends has the right product at the right moment.

But for all its globetrotting exploits to pay off, the Trend Office will need to change not just what Wal-Mart carries, but the way the retailer thinks about merchandise, according to those inside and outside the company.

For 43 years, Wal-Mart has been obsessed with individual bargains -- the $24 DVD player, the $12.90 twill jacket -- at times regardless of how they fit in with the rest of the merchandise in the store, or even whether they are in style.

But that singular focus on bestsellers has left the chain without the kind of storewide design aesthetic that has turned rival Target into Tar -zhay, crammed, at every turn of the shopping cart, with bold, contemporary patterns and designs that evoke a lifestyle. And it has left Wal-Mart vulnerable at a time when customers at all levels, even Wal-Mart's basic customers, want fashion.

"We are an item house," concedes Wal-Mart's vice president of product development, Claire Watts, a veteran of Limited Stores, Lands' End and May Department Stores. "But customer expectations require more than great items."