It's a Wal-Mart world

RUGGED fashion individualists might want to consider this as they drop into Asda during the post-Christmas sales to pick up an inexpensive item of clothing under the George label: in the foreseeable future there may be more people on the planet wearing George than any other apparel brand.

It is a startling thought that a British clothing label could become the most popular on earth - and it is all because Wal-Mart, Asda's parent and the world's largest retailer, is redefining the meaning of mass-marketing as it expands across the globe.

America weighs up Wal-Mart

George, created by British designer George Davies in 1990, is spearheading that expansion. But as Wal-Mart grows, there is increasing disquiet - particularly in America - at the way it can crush rival businesses and even affect America's balance of trade.

Sector by sector, it is taking over US retailing. It may only be a matter of time before it does the same overseas.

As the season's sales progress, prices - Wal-Mart's watchword - are lower than ever. The company's turnover is expected to have outstripped that of any other post-Christmas season.

Rival retailers in product lines as diverse as toys, food, clothing and music will watch their profit margins shrink as they struggle to keep up.

The George apparel line is a good example of Wal-Mart's strategy. Shoppers seem to agree the garments are not only cheap, but good quality for the price, with a dash of genuine fashion thrown in. Clothes range from socks and T-shirts to cashmere and leather, from office suits to casualwear.

Having established its success in Britain, Wal-Mart has rolled out George successfully in several of its fastest-growing markets including Korea, Mexico, Canada and Germany.

It is using the clothing line to differentiate itself from rivals and to signal that it is not just a grocery or CD store. Designs are adapted to suit cultural differences in various countries and styles are changed as often as every two weeks in response to what is selling best.

George tries it luck in the US

Now comes the big test - the US market. George clothes are already selling well in 250 stores around the country, but the children's line is soon to be extended to all of Wal-Mart's 2,650 US stores.

The women's clothing line will also go nationwide soon. If its other product lines are any indication, Wal-Mart could soon be the biggest clothes retailer in the US, with George its best-selling brand.

It is in the nature of Wal-Mart's massive economies of scale that the more clothes it sells, the cheaper and more competitive they are likely to become.

As Marks & Spencer used to do, the US giant can get deals from its suppliers on razor-thin margins because of the sheer volume of business it offers. The bigger the volume, the more it can screw down suppliers' prices.

But Wal-Mart is vastly larger than Marks & Spencer ever was. Its revenues last year were $244.5bn (£134bn) and it will have easily beaten that last year. With a workforce of 1.3 million people, it rivals the US military in manpower.

Perhaps most astonishing of all is its effect on American trade. Soaring imports from China are the largest single contributor to the ballooning US trade deficit, which is hitting record levels. Wal-Mart accounts for 10% of those Chinese imports - or $12bn of goods.

The company has already conquered the grocery and music retailing businesses in the US, easily outstripping its nearest rivals in volume.

It looks as though it may have finally toppled Toys R Us from pole position in toy retailing at Christmas. It could not quite match that chain on price in previous years, but this time - partly thanks to imports from China and partly because it appears to have reached a critical mass with the public - its prices are slightly lower. According to a recent Goldman Sachs survey, Wal-Mart had the lowest prices on 92% of toys covered.

Toys are us

The implications for US toy retailers are dire.

New York toy store FAO Schwartz has already given up the ghost, filing for bankruptcy last month. It had other problems, and tended to sell higher-end toys, but analysts say that the Wal-Mart phenomenon certainly contributed to its downfall.

Toys R Us may be next. The company warns that its loss per share last year could be twice as big as expected when the results are in. Despite an improving economic background, the company believes its sales have dropped to $6.5bn from $7bn in 2000. It is also closing 182 Kids R Us stores in the US.

Meanwhile, Wal-Mart's share of the traditional toy market has soared from 10.8% in 1993 to between 21% and 25% now.

'We're gong to be the low-price leader, and that will include holiday toys‘, says the company.

While Wal-Mart's cheap prices are a boon to consumers, its ever-growing dominance worries many in the US.

?Is Wal-Mart Good for America?‘ asked a New York Times headline recently. Its policy of buying cheap overseas goods seems to undermine US manufacturers. Its non-unionised workforce is poorly paid even by retailing standards. And it is now the target of investigations into the alleged use of illegal immigrant labour.

World domination

Whatever Americans may think, however, Wal-Mart is taking over from the likes of McDonald's as the cutting edge of US cultural expansion around the world.

Its overseas profits are the fastest-growing part of the business and now account for about a quarter of the total. Which is how a British clothing line comes to play a leading role in the expansion of America's biggest company.

Only five years ago, analysts say, the company was so focused on the US that it would never have considered a brand that had not come from its home market. It is a mark of Wal-Mart's growing internationalism that its main clothing brand originates from the UK.

Fashion is a matter of taste. But when the price is right, it seems, taste is remarkably similar in London, Seoul, Frankfurt, Mexico City and Peoria in Illinois. It's George.

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