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Daring to Be Wal-Mart

The giant retailer rolls out a glossy magazine ad campaign in a bid to grab higher-end customers.
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(WMT) - Get Walmart Inc. Report

may be in


, but it's got a long way to go to match


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The Bentonville, Ark., retail giant's decision to splash its brand across the pages of an uppity fashion rag is first of all a counterpunch to Target's ad blitz in

The New Yorker

magazine. That artsy appeal to urban sensibilities has generated a considerable buzz of its own.

But Wal-Mart is also making a bid to score better-heeled customers -- and perhaps soften up some longtime opponents and would-be shoppers. After all, Wal-Mart's low-income customer base is hurting as gas prices soar and jobs go abroad. And with two big teachers' unions boycotting the company going into the busy back-to-school shopping season, Wal-Mart needs all the image help it can get.

Still, with the discounters fighting tooth and nail for market share going into the all-important end-of-year shopping rush, at least one brand analyst predicted Target's strategy will prove more successful.

"People are willing to believe that there is an actual investment taking place in designer and higher-quality products at Target," said Robert Passikoff, president of Brands Keys. "That's why they have some credibility in creating stylish ads for an intellectual, cosmopolitan reader. Target has spent the last five years migrating their brand in that direction."

Passikoff said Wal-Mart's brand, on the other hand, does not support such a strategy.

"Besides advertising at

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, what has Wal-Mart done to make anyone believe they might go in there and find anything that doesn't have a yellow sticker on it?" he said. "I'm sure


is more than happy to pocket their advertising dollars, but their readers aren't going to take it seriously."

Wal-Mart's spread in


fall fashion issue will promote the theme "Dare to Be You," encouraging young women to add a personal touch to their back-to-school wardrobe and dorm room decor. It will mark the beginning of an ad deal set to run through 2007, and the retailer also will run an ad campaign in the teen fashion book

Elle Girl


The move will run head to head with Target, whose 17 or 18 pages of ads in the Aug. 22 edition of

The New Yorker

made it the first single advertiser to sponsor an entire issue in the magazine's 80-year history. The ads, which appear as a series of illustrations by a raft of artists, are intended as a tribute to New York City and its inhabitants checkered with the Target logo.

Both retailers are clearly attempting to establish a fashionable appeal to their discounted wares, but Target, whose more chic product mix has earned it its French-sounding nickname "Tar-zhay," has a head start. Wal-Mart's brand has historically focused on low prices, featuring its yellow smiley-faced price-slasher. The hoity-toity world of


almost seems like the antithesis of its founder Sam Walton's practical and folksy demeanor. Another big marketing deal of late, in which Wal-Mart became the sole purveyor of albums by country music star Garth Brooks, is more in line with Walton's image.

Of course, Walton is long gone, and while his namesake company has risen to be one of the largest corporations in the world, it has also set off a media storm the likes of which he probably could never have imagined.

From its employment policies to its product decisions, trade practices and corporate governance, Wal-Mart has become a lightning rod for criticism that its peers, for various reasons, have largely managed to avoid. It has been accused of exploiting and discriminating against workers, creating suburban sprawl, adding to the decline of the American manufacturing sector with its trade practices and censoring artists whose products it deems obscene or offensive.

Meanwhile, in the last year, Target has consistently posted stronger sales growth than Wal-Mart. Its higher-end product mix and ability to avoid public controversies have paid off.

For the second quarter, Target recently reported better-than-expected earnings driven by a 6.7% gain in same-store sales. It also affirmed its earnings guidance for the year and set a goal for same-store sales gains of between 4% and 6%. Wal-Mart's sales growth lagged behind, showing a same-store sales gain of just 3.5%, and the company warned of uncertainty about its performance in the back half of the year.

The company blamed high gas prices, which weigh disproportionately on the spending power of its core, lower-income customer. Now, its advertising joust with Target looks like an effort to win some of its more affluent customers who still shop for discounted products, and the move comes after it has rolled out a major marketing campaign to combat its negative political image.

Still, the drumbeat continues.

The National Education Association, with 2.7 million members, and the American Federation of Teachers, with 1.3 million, teamed up with the United Food and Commercial Workers union to urge shoppers not to buy school supplies at Wal-Mart. Organized labor has failed to make inroads in organizing Wal-Mart's workers, despite the low wages and health benefits offered by the retailer.

Frustrated activists have resorted to large-scale publicity campaigns criticizing its business practices, and they have begun traveling to Wal-Mart stores overseas in an attempt to spread ill-will for the company abroad.

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Over the past two years, shares of Wal-Mart have dropped 22%, while Target shares have jumped nearly 40%. If the world's largest retailer wants to regain the upper hand on Wall Street, it will need more than a marketing makeover.