Just five years ago Walmart was unequivocally the biggest and most powerful retailer in the world. While it’s still the biggest, the balance of power may be shifting away from the big-box juggernaut. In an age of comparison shopping and the proliferation of online retailing, Walmart’s value proposition — wide assortments at low prices— may not be as compelling as it used to be. This is reflected in Walmart’s U.S. comparable-store sales, which were negative in 2010 and 2011 and reached only 0.3% for the fiscal year ending in January 2012.

Walmart is suffering because today retailers have to compete on factors beyond low prices. Winning retailers are also offering something else — such as convenience, high quality or a compelling in-store experience — to foster a connection with their customers.

But Walmart may also be a victim of its own success, in that its size makes it operationally challenging to act in a local or customized way. Its size also makes it harder to move faster in a world that is increasingly about providing a constant stream of new merchandise. Yet this is increasingly what consumers expect.

Walmart has long survived by being all things to all people, but it must now focus on being the right things to the right people. Despite what Walmart is up against, it still has the foundational elements that made it so powerful in the first place.

So how can Walmart bounce back? It needs to create a deeper connection with its customers and, to help accomplish that, it must think beyond just low prices and toward providing value in other ways.

A great place to start cultivating this connection is in the store. Many large retailers are trying to develop a small-store feeling by including specialty boutiques within the store. J.C. Penney and Macy’s are popular examples, but the trend extends beyond department stores. Kroger, for example, found Murray’s, a small, highly specialized cheese shop in New York City, and was so taken by it that the retailer added a gourmet cheese island in an ever-increasing number of its stores, staffed by cheese connoisseurs. Then there’s Bijoux Terner, a retailer that puts fun, fast fashion under $10 — costume jewelry, watches, pashminas and the like — into airport kiosks and other high-traffic locations.

A concept like this could have a place within a big-box retailer. Walmart needs to find a variety of equally compelling offerings of its own — magnets that will keep customers coming back week after week. The idea here is that the customer could go into Walmart and find, throughout the store, eight or 10 specialty boutiques or areas, each aimed at connecting with different customer segments in a special way. Walmart might feature something seasonal, trendy or both, or something that reveals a deep knowledge of a specific product (such as gourmet cheese). These boutiques could also be localized to better connect with the customers of each region. Walmart recently took a step in this direction by hosting NASCAR fan events in select stores in advance of the STP 400, complete with car displays, driver meet-and- greets, racing simulators and, of course, plenty of NASCAR- theme merchandise.

Moving forward, the key is to move these types of promotions from special-event status to regular fixtures. Why not offer classes that tie in to Walmart’s classic offerings — everything from cooking classes to gun safety demonstrations?

The same customer experience imperative applies to Walmart. com. Kurt Salmon research shows that Walmart’s average order- to-delivery time is up to 62% slower than such pure-play online competitors as Amazon and Zappos. Even though speedier shipping may raise costs, it also does wonders for customer loyalty and can ultimately pay for itself with increased sales. Beyond delivery speed, Walmart’s online ordering could also benefit from an express checkout option — it’s one of the few big players without one. And the returns process could be more customer-friendly if Walmart. com included prepaid, preprinted return labels, as Nordstrom, Sephora, HSN, QVC and others do. It’s all about creating a more convenient, compelling environment for the consumer.

Of course, experience alone isn’t enough; the right product mix is also imperative. Sears recently announced that it will license its DieHard, Kenmore and Craftsman brands, and Walmart could benefit from the cache these brands would add to its assortment. In the same vein, Walmart could have cherry-picked the leftovers of Steve & Barry’s athlete-endorsed, inexpensive sportswear lines. Though Steve & Barry’s didn’t ultimately succeed, some of its celebrity lines would still be popular, including those from Sarah Jessica Parker, Venus Williams and Bubba Watson, who just won the Masters.

If Walmart is to avoid a steady decline and share erosion, it will have to fight its way back to relevance. Walmart still enjoys tremendous advantages in its purchasing power, supply chain excellence and broad distribution. What’s left is for the retail titan to achieve similar excellence and innovation in how it builds relationships with its customers.

Originally published in Mass Market Retailers.