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Good piece in USA Today about why more and more retailers – from Target to Toys R Us – are stocking grocery products and other basic consumables.

The reason can be summed up in one word: Walmart.

Here is the rationale, in a nutshell:

“Consumables weren't seen as a growth engine before,” USA Today writes, because “profit margins are much thinner in food than apparel or home furnishings.” But now, learning from Walmart’s success in an economic downturn that threatens to have long-term repercussions in terms of consumer spending habits, “merchants are realizing that if shoppers are going to keep spending less, stores need them to come in more frequently. Offering a greater range of necessities will help.”

The big question – and it is one that probably cannot be answered with any certainty until the recession is over and some level of prosperity has returned – is whether in good times Walmart can keep the customers it has lured into its stores during hard times.

That’s one of the challenges facing Walmart’s new CEO, Mike Duke, who has to find ways to retain upscale customers – something that has always been hard for the company to do. Forays into fashion apparel have been less than successful, but Walmart has done a better job in areas such as flat screen televisions; Business Week reports this week that it is expected that Duke will push Walmart into an expanded presence in computers and other high end electronics via alliances with companies such as Apple and Dell.

Insiders, Business Week writes, say that Duke is “taking a big hand in moving Walmart upscale while continuing to emphasize its low-price mantra. Aisles are being widened, lighting improved, and shelves lowered to give the stores a more sophisticated feel. Even the well-trafficked corridor known as ‘Action Alley’ is no longer packed with pallets of random merchandise.”

KC's View:
Perhaps it is inevitable when a company is as big as Walmart, but in a lot of ways I think there are two very different companies. There are the stores operated by Walmart in the southern tier of the US, of which the units that I see in places like Bentonville are fairly typical – clean, bright, well-merchandised. And then there are the stores that they operate near me, in New England, which would not be described that way and will have a much harder time hitting the right notes in any sort of upscale movement.