Is Wal-Mart a Big Baddie--Or Not?13 Jul, 2009 By: Thomas K. Arnold
I've been chastised severely by a couple of people for my blog entry from last week in which I blasted Wal-Mart for allowing kiosks into its stores that directly compete with the chain's DVD sellthrough business. I surmised the chain had allowed kiosks in because it was losing faith in DVD, a point underscored by Wal-mart's lackluster merchandising of Blu-ray Disc.
My two callers — and neither of them is a Wal-Mart executive, by the way — both stuck up for the chain, which by most accounts is responsible for about 40 percent of total DVD sales in the United States. It isn't so much a case of Wal-Mart losing faith in DVD, they told me, as it was one of Wal-Mart simply being a smart retailer and following the money. While it is true that for years Wal-Mart used the DVD sales frenzy to drive customers into its stores, the chain's “loss leader” strategy wasn't entirely of its own making. Wal-Mart never drove prices down, bur, rather, reacted to deep discounting by Best Buy and others. As a result, studios were actually making more money from DVD sales than consumers were spending on them.
Wal-Mart approached the studios several times and asked for lower wholesale prices, but the studios didn't budge, according to my callers. So now that DVD sales are down and Redbox rental kiosks are the hottest thing going since bipods, Wal-Mart doesn't feel any sense of obligation to prop up the DVD sales business in any way. Instead, the chain is going with the money and leasing space to Redbox — I'm sure, for a cut of the action.
By allowing Redbox kiosks into its stores, my callers argued, Wal-Mart also is doing what all smart retailers should do: strive to give their customers a choice. Wal-Mart customers can still buy DVDs, but now they can rent them, as well.
Readers, I'd be interested to hear where you weigh in on what is clearly a divisive issue. Is Wal-Mart a big baddie that used DVD sales to drive traffic into its stores, and is now turning its back on the sellthrough business and going with the hot new kid in town, Redbox? Or is Wal-Mart merely being a good retailers and doing something that can enhance both its revenues and its customer service?
I'd love to hear from you.