The world's biggest retailer is reportedly planning to double the number of organic grocery items it offers. The new products may not steal Motley Fool Stock Advisor pick Whole Foods'
Wal-Mart began testing out the organic items in its new Plano, Texas, Supercenter this week. The store offers 400 organic foods in what the Associated Press reports is part of an experiment aimed at upscale shoppers. The initiative will shortly grow in scope, as the retailer aims to increase its organic groceries in other locations in the coming months.
It's an interesting move for a company that has long emphasized low prices above all else. That's not to say that Wal-Mart is now going to soak its customers. The retailer promises that its organics will be sold "at the Wal-Mart price." The idea of attracting somewhat wealthier customers interested in good deals but looking for more specialty items seems to make sense. After all, that strategy has worked pretty well for Target
Still, Wal-Mart's image as a "no-frills" retailer is pretty ingrained in consumers' heads, considering that the company has defined itself as the champion of lower-income shoppers for years. Consequently, trying to appeal to more image-conscious consumers is going to be a long and potentially costly process, and there are no guarantees that it will work. Furthermore, Target will doubtless see Wal-Mart's emphasis on organics as a threat, and probably respond as such.
On the other hand, Wal-Mart's new emphasis on organics has other benefits. As the Associated Press article notes, the retail giant's shift to organics has the potential to push the company's massive supply chain into adopting greener practices. One already impressive move is Wal-Mart's decision to have all the wild seafood it sells certified as having been caught in a manner sustainable to the species and environment.
However, Wal-Mart's focus on organics is about more than competing for new customers or environmental stewardship. Wal-Mart's detractors have successfully lobbied against the company's expansion, especially in urban areas, by pointing to what they see as the firm's negative influences. Wal-Mart's focus on organics and the potential changes in the company's supply chain will create a powerful counterargument against these claims. The greening of Wal-Mart likely will pave the road to further expansion, and that's something investors and environmentalists may actually agree on.
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.