What Walmart Can Learn From Uniqlo to Boost Apparel Profits

Last Updated Jun 3, 2010 1:25 PM EDT

Walmart's Kamali All-in-One dressWith the launch of a Norma Kamali plus-size line this fall, Walmart (WMT) has another great opportunity to save itself from its apparel woes. After all, the average woman is a size 14-16, so Walmart's designer line is sure to appeal to plenty of consumers. But in order to effectively compete against arch-rival Target (TGT) and get back to profitability in apparel, Walmart needs better strategies overall. From designing to merchandising and marketing, the folks in Bentonville would do well to study that uber-successful behemoth of basics -- Uniqlo.

First, Walmart needs to forget the competition's strategy entirely. Though Target's made quite a name for itself among bargain-hunting trend setters, the Walmart shopper is largely looking for mainstream basics. But who says wardrobe mainstays must be frumpy? Without going over-the-top but still infusing current styling, Uniqlo successfully peddled enough t-shirts, cardigans, and skinny jeans to rake in $7 billion in global sales last year.

Another ingredient in Uniqlo's secret sauce is quantity. The company aims to "ensure stores are stocked with the appropriate number of garments in terms of color and size so that customers can always get the products that they want."

Yet while Walmart's Kamali collections have yielded a (relatively) short list of "timeless basics" such as Kamali's stretch "All-in-One" dress that can be worn six ways (only $24!), Walmart still misses the boat. At 41 pieces in limited, or no color choices, the summer line doesn't offer women the chance to buy the dress or the organic cotton tank in a variety of shades. At this point the math is simple: instead of walking out with an armload of tanks at $8 a pop, the customer snags one in black and maybe one in grey.

Though it doesn't hurt that Kamali's famous "Sleeping Bag" coat lit up the eyes of fashion editors -- and ignited the curiosity of cost-conscious chicsters -- Walmart's shown its reluctance to invest heavily in marketing and advertising. That coat never played in the hefty pages of Vogue's ad-heavy September issue, nor did anyone but the most dedicated scourers of sartorial blogs know that it was there for the taking. That's fine, Uniqlo doesn't do a lot of ads either.

What the Japanese retailer does invest in heavily in is its supply chain. Uniqlo has low material costs due to its large-scale worldwide network (like Walmart!), but also because it commits to buy up 100% of the raw materials that a particular supplier can provide. The problem on the Walmart side is not that it can't command large orders it's that the retailer doesn't know when to stop squeezing suppliers to wring out a profit. By playing nice with apparel materials manufacturers a la Uniqlo, Walmart could bring in better quality goods and still win at the markup game.

Finally, Walmart needs to rethink its store traffic patterns. It's no secret the retailer's recession-era wins have been skewed to the less profitable grocery segment. People need to buy food even in bad times. As the country emerges from the economic slump, Walmart would do well to position its apparel across the wide aisle that separates food from the rest of the store stock. How hard would it be to switch out frames and home accessories with a few rounders of fashion? Better yet, position the junior styles across from the frozen pizza and soft drinks. That would certainly turn heads, and drive profits.

Image via Walmart.com