Corrected: Wal-Mart partners with Lord & Taylor to expand online fashion presence

(This version of the Nov 13 story corrects to say that Wal-Mart is the largest clothing retailer in the United States, not the world, in 7th paragraph)

By Nandita Bose

CHICAGO (Reuters) - Wal-Mart Stores Inc said on Monday it will offer Hudson's Bay Co- owned department store chain Lord & Taylor dedicated space on its website, as it looks to make deeper inroads into the fast-growing online fashion business.

The world's largest retailer will start offering higher-end clothing and accessories from Lord & Taylor to its customers in spring 2018.

The partnership will allow Lord & Taylor to open a virtual storefront on Walmart.com and boost customer traffic to its website by reaching a wider audience. It will boost Wal-Mart's online assortment with premium products and advance the retailer's effort to access millennial customers who usually do not shop on Walmart.com.

"Our goal is to create a premium fashion destination within Walmart.com," Denise Incandela, Head of Fashion, Walmart U.S. eCommerce told Reuters in an interview on Monday. She said Wal-Mart shoppers search the retailer's website for premium items and the company aims to expand its online business with a focus on such products.

"This is a part of a larger business strategy where we are working to create a new Walmart.com," Incandela said. She did not comment on the financial terms of the partnership.

In the past year, Wal-Mart has been acquiring small online fashion brands like Shoebuy, Modcloth and Bonobos in an attempt to recover lost ground against Amazon and others in the online fashion world.

Wal-Mart is the largest brick-and-mortar clothing retailer in the United State, with 2016 sales for that category exceeding $23 billion, according to retail think tank Fung Global Retail & Technology.

But despite its store muscle, Wal-Mart has failed to replicate that success online. It has not only struggled to attract the type of affluent young consumers who tend to shop for clothes online but due to its low-income customer base and brand perception, has also faced challenges in persuading well-known apparel brands to sell on its website.

Amazon leads the U.S. online clothing and footwear market with sales of $13 billion in 2016, up $9 billion from five years ago. It is expected to triple its share of the U.S. apparel market over the next four years, according to data from Euromonitor and Forrester.

Virtual storefronts have become a strong e-commerce tool with retailers including Amazon.com Inc and Alibaba Group Holding Ltd routinely offering dedicated space to brands on their website.

Virtual stores are also a preferred route for U.S. retailers to enter new countries where they don't have operations. For example, Macy's in 2015 said it would enter China with a virtual store on Alibaba and test demand in that market.

(Reporting by Nandita Bose Editing by Sandra Maler)