In early 2006, the smiley face went away along with the image of "rolling back" prices. Now, I've posted on why Wal-Mart wanted to rid its image of the smiley face and bring in something fresh. After all, the retailer wants to be known as a company that markets to more than shoppers only looking for the lowest prices.

In early 2006, the smiley face went away along with the image of "rolling back" prices. Now, I've posted on why Wal-Mart wanted to rid its image of the smiley face and bring in something fresh. After all, the retailer wants to be known as a company that markets to more than shoppers only looking for the lowest prices.

It makes sense. Customers were getting fed up with how crowded its stores were, how messy the stores could be, how ambivalent its "associates" were. They wanted discount prices along with a better overall shopping experience.

Customers demanded more, so Target filled this need (and still does) and started taking business from Wal-Mart. Now, Wal-Mart's revenue did not go down (as Sam's Club and international sales are in its overall mix), but Target's image sure made it look like a more pleasurable store to shop.

Wal-Mart loses its image while competitor Target strongly builds its image

During the last 18 months, Wal-Mart saw Target reinvent itself as a higher-level competitor with the same pricing power. In other words, Target had built its image as a style-conscious retailer which attracted the discount shopper.

As of January, Fleming changed roles completely, as he's now the chief marketing officer. It's not that Fleming is no longer in charge of Wal-Mart's image and brand merchandising, but now he's got people working for him in charge of those areas.

What progress has been made? From the public's perspective, virtually none. Gone is the "rollback" advertising message along with the single biggest image identifier Wal-Mart had in its arsenal -- the smiley face.

While Target's bulls-eye and trademark red color easily give that company an image (guess what it is), its also made its way into introducing items in its housewares and grocery areas. This strategy has given Target the appearance of having much nicer products than Wal-Mart while still offering those items at discount prices. Target's products earn the retailer a "better-than-Wal-Mart" margin. Result? Wal-Mart has started to copy the strategy in many ways.

The problem with Wal-Mart's strategy to lure higher-income shoppers who value experience

While Target was successful building its image of a style-conscious retailer with the discount edge, Wal-Mart's attempt to do the same thing was floundering in the latter half of 2006. There are many parts to this: Wal-Mart's marketing was non-existent outside its "always low prices" tagline (and still is), many of its stores weren't changing to reflect the "higher-end Wal-Mart" image that the company was trying to project to the marketplace and the flurry of negative PR continued and even intensified at the end of last year.

Let's compare a few aisles in a SuperTarget store and a Wal-Mart Supercenter. See any differences? I see these immediately:

• Target: wider aisles, shelf presentation much better, bright and colorful floors and surroundings, very nice impulse displays, ample lighting, non-cluttered shelves and easy recognition of sale items

• Wal-Mart: slimmer aisles, cluttered shelf presentation, generally worse shopping conditions (dirty floors and uneventful surroundings (which don't evoke a purchase mentality), very shoddy impulse displays sitting on half-pallets and no sales items at all.

The differences referenced above help explain why Wal-Mart has had trouble attracting the higher-income shopper. Now, I know that Wal-Mart does not have "sales" -- the retailer goes on the premise that it has "everyday low prices", and therefore does not need sales outside of seasonal months like November and December.

Big mistake in this day and age. Consumers respond to "sales" in droves, and Target's continual offering of items "on sale" gives it a competitive advantage over Wal-Mart. While it may be true that Wal-Mart has lower prices all the time that beat "sale" prices of most of the competition, customers still respond to "sales". Does Wal-Mart need to recognize this? Different times require different strategies, right?

Where is Wal-Mart's image headed?

Well, the world's largest retailer didn't get that way by not giving the consumer what it doesn't want. Apparently, the consumer (in Wal-Mart's largest market, the U.S.) wants the "lowest price all the time on everything", which is an image Wal-Mart has relentlessly and diligently used to tremendous success. Wal-Mart saves the average consumer at its stores considerable money every day and forces the competition to meet its prices or come close.

Wal-Mart may not ever be able to achieve its strategy of becoming a "higher-end discount retailer" to quash the market's demand that it grow sales higher and higher even as it has more revenue than any other retailer in history, But it will take a long time much to the chagrin of market watchers that want immediate gratification. If Wal-Mart can turn around its image into one that mimics why Target has become so "in vogue", the retailer will have more power than ever.

But does it even want to do this? Does it have the wherewithal?

Some suggest that Wal-Mart's efforts to reinvent itself as a discount retailer with the style and panache that image-conscious consumers require will cause it to increasingly look to international markets for growth instead of trying to goose sales (and the tiny profit it makes) from the U.S.

With that, next week I'll delve into Wal-Mart's international strategy. It's failed in Germany and South Korea, yet the company is pushing hard into Europe still while really sinking its teeth into the Indian and Chinese markets. Is its approaching China and India like it did Germany and South Korea? Will it find the same or different obstacles? Tune in this time next week to see. Until then, have a great week!