The first store we visited was located in Valley Stream, N.Y., about 20 miles east of Manhattan on Long Island. The store is situated on the fringes of the Green Acres Mall, which also houses a Macy's and a J.C. Penney. The discount store National Wholesale Liquidators sits on one side of the Wal-Mart, and Petland Discounts, a pet supply store, is on the other. A Best Buy and a Circuit City are also in plain view.

The average household income in the three-mile radius of the mall is $85,000, and the Wal-Mart store here reflects the retailer's effort to broaden its appeal to upscale customers. Last year, Wal-Mart started an 18-month remodeling program of 1,800 stores to improve the layout and appearance of the apparel departments, adding faux wood floors, widening the aisles, eliminating clutter, and upgrading the bathrooms. Pao was impressed with the cleanliness and neatness of the location, a recurring positive at the company's stores. The once-common complaint that customers would find clothes, toys, and other items strewn about was definitely not an issue. "Wal-Mart really put neatness as a No. 1 priority and we can see it," says Pao.

The Valley Stream store has clearly benefited from the various upgrades. The first thing that strikes Pao is how much the store reminds her of Target. Faux wooden floors in the men's and women's areas glow under muted lighting. Stylish signs featuring models guide customers to sales areas for undergarments, sportswear, or the more upscale George and Metro 7 apparel lines. The aisles are much wider than they are in Wal-Mart's older stores.

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The positive aura faded, however, when Pao looked for help. We walked into the electronics area, where Compaq and Acer computers are displayed under glass cases. Pao wanted to see some of the computers from Dell, the PC maker that just reversed its longstanding strategy and began selling its products through retail stores. No salesperson volunteered to help, so we approached one employee dressed in the company's uniform of polo shirt and khakis. When Pao asked about the Dells, he said, "We're sold out of them, and I have no idea when the next shipment is coming in." Then he turned and walked away, never volunteering to find a computer at another store or suggesting he could find out when the next shipment would arrive.

The risks of selling on price alone
Pao wondered aloud what had happened to Wal-Mart's well-respected point-of-sale system, technology that is supposed to automatically order items when they're close to selling out. The issue may have something to do with working out the kinks in the new Dell relationship, although Wal-Mart declined to discuss the missing computers.

Consumer electronics is clearly a big focus for Wal-Mart. In each of the three stores, the electronics departments displayed several 32-inch, flat-panel TVs on the walls. Trying out the products, however, can be problematic. There was typically no way to experiment with a television and no salespeople around to help. It's a far cry from the experience at Best Buy or Circuit City, where customers can plop down on comfortable sofas in a living room-style setup and play around with the features on huge plasma and LCD TVs. "You have to bet on a hope and a prayer that this is what you want, because there's not much you can demo here," says Pao.

In the second store we visit, in Westbury, N.Y., we see a row of fancy Apple iPod display cases. Pictures are shown for two versions of the music player, the shuffle and the nano. But the display cases are empty. No actual iPods are anywhere within view, and no employees are nearby to help. Pao says she worries that this lack of service means that Wal-Mart's strategy is to sell at the lowest price, rather than compete for higher-end customers who may be willing to pay for a little expertise or hand-holding. "If they don't differentiate themselves [in electronics], the low margins will come back to bite Wal-Mart as they already have in the rest of the store," she says.

The Westbury store is located in an area with a median household income of $82,000, but it wasn't as chic as the Wal-Mart in Valley Stream. Faux wooden floors are used sparingly, seen only in a few sections such as handbags and women's apparel, and the aisles are relatively narrow. Pao felt like it was a half-hearted attempt at looking nice, since the rest of the store still had the unsightly gray linoleum floors.

The store in Uniondale was the last we visited. The town is about 28 miles east of Manhattan with a median annual income of $68,000. It was the most neglected of the three stores, with minimal upgrades. Rows and rows of clothing hung on T-bars with little attempt to make the products appealing. The displays here reminded Pao of Woolworth's, the five-and-dime store that went out of business in the 1990s. "Customers need visual cues to focus on — they need the little boutique-like effect that Target creates by focusing on different items in various parts of the store," says Pao. "The clothes on T-bars as far as the eye can see gives it the feeling of a big mess, even though it's neat enough."

CONTINUED : Fashion disaster

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