Wal-Mart Stores Inc. is going high-end.

In some markets, such as the Dallas area, Wal-Mart (NYSE: WMT) is upgrading its image to more closely fit the area's demographics. Soon, the mega-retailer will bring similar concepts to Austin, drawn by the city's young, hip and affluent demographics.

While some may welcome Wal-Mart's attempt at deviating from the big-box feel, still others say a fancy Wal-Mart is still a wolf in sheep's clothing. Regardless, Wal-Mart is making an attempt to spruce up its facade in many locations, going so far as to put in posh coffee shops and sushi bars to appeal to a higher-income demographic.

Wal-Mart made headlines when it opened a Plano luxury store, featuring $500 wine, wood floors and sushi. The company has since opened another high-end concept store in Highland Village in Dallas that features an upgraded interior design and a bike and repair shop instead of its standard tire and lube shop. The Highland store also uses energy-efficient technology, such as LED lighting and motion detectors.

In Central Texas, Wal-Mart plans to squeeze in a multilevel Supercenter alongside Austin's Northcross Mall, and plans call for the store to have high-end materials incorporarted into the design of the store. The exterior of the Northcross Wal-Mart looks more like a department store rather than it's usual beige box design.

Wal-Mart says it has always tinkered with store formats, but some analysts say the retailer is thinking more outside of the Supercenter-sized box to gain market share.

"For years the ROI [return on investment] is clearly, first and foremost, with the Supercenter," says Al Meyers, TNS Retail Forward vice president. "But there's less and less places where you can put that size of a store, and there are certainly niche concepts that can coexist with a Supercenter that go after these groups. I think it just makes sense for them to have more arrows in their quiver, if you will, to be able to take more market share in a particular area."

Much like Northcross, the Highland Village store didn't come without controversy. Neighborhood groups there fought to prevent the development from happening. After a series of battles with Northcross-area neighborhood groups and the courts, Wal-Mart plans to open a 192,000-square-foot store. Groups such as Responsible Growth for Northcross and the Allandale Neighborhood Association have lost lawsuits against the city aimed at blocking the Wal-Mart development. However, Wal-Mart agreed to decrease the size of its store.

Responsible Growth for Northcross spokesman Jason Meeker says the smaller footprint will attract the same traffic-related problems of a traditional Supercenter. Meeker, who has turned the conflict into a platform to run for City Council, says the company and its partners could have done a better job of working with concerned area residents. "When Wal-Mart tries to move into other urban areas, the Austin model will be seen as an example of how Wal-Mart will not play fair with you," Meeker says. "And it is their loss for losing in the court of public opinion, even though we lost our lawsuit. And I think that matters more to them in the long run than they realize right now."

Wal-Mart Public Affairs Manager Lisa Elledge says the company and the developers "went above and beyond what we were required to do by the city," and that they did as much as they could to meet community concerns. George Whalin, president and CEO of Carlsbad, Calif.-based Retail Management Consultants, says that about four years ago, Wal-Mart began to build stores that didn't look like the typical big-box. "You get to a point where you can only build so many more stores alongside the highway and in rural communities and in suburbs," Whalin says. "They're just trying to find a way to get into more of these cities.'"

Wal-Mart Stores has three types of stores in order of size and selection: Supercenters, the discount stores and Neighborhood Markets. There are about 3,500 U.S. Wal-Mart stores and overall sales growth is slowing, according to its annual reports. Before entering a market, Wal-Mart takes a look at a number of factors, including the competitive environment, infrastructure, customer demographics and income, says Wal-Mart spokeswoman Amy Wyatt-Moore.

In recent years, the company has followed a "Store of the Community" philosophy, which calls for analysis of local demographics to determine the strongest types of merchandise and store design.

"No two stores are exactly alike in terms of their merchandise mix, and even the layout varies in a lot of the stores because it's really about studying shopping patterns and making adjustments based on those patterns," Wyatt-Moore says.

Aside from its two high-end stores in Plano and Highland Village, Wal-Mart has also built an energy-efficient store in McKinney that heats the building by burning used cooking and motor oil. The company says it will take bits and pieces of these stores to apply to other locations, not necessarily copying the entire store. "[These prototype stores] provide us with the opportunity to get a snapshot of what these stores can do, or what some of these concepts in these stores can do, how they can perform in other markets," says Daniel Morales, Wal-Mart director of communications for the Southwest.

In a TRS Retail Forward report on the Highland Village store, which opened in November, author Katla Watson says Wal-Mart could improve performance at existing stores if it implemented some of the prototype's elements. "While there is still room for improvement, Wal-Mart's progress deserves praise," Watson says. "Wal-Mart looks to be taking pages from best-in-class category specialists, e.g., Babies 'R' Us, Bed Bath & Beyond, Best Buy, even Whole Foods, as it introduces its latest merchandising efforts on a department-by-department basis."