Wal-Mart Ups Electronics Footprint, Adds Kiosks18 May, 2009 By: Chris Tribbey, Erik Gruenwedel
Wal-Mart Stores Inc. this week is reportedly upgrading its electronics departments in 3,500 stores as the retail behemoth aggressively battles Best Buy Co. to fill the void left by the shuttering of No. 2 consumer electronics retailer Circuit City Stores.
The upgrades, which include expanded offerings of Blu-ray players and movies, high-definition televisions, PCs and mobile phones, come despite an industry wide 12% CE sales decline in April — the worst since last December.
The retailer will have standalone sections devoted to Apple, Nintendo and Palm Inc. CE product, including the latter’s highly anticipated Pre smartphone.
Separately, Wal-Mart said 77 stores in the Northeast are installing e-Play kiosks, which offer selections of DVDs, Blu-ray Discs and video games for rent from $1 per day.
The machines are being installed in stores that do not have Redbox movie rental kiosks and are owned and operated by third party e-Play. The company will also be accepting trade-ins for certain games for the Wii, Xbox 360 and PlayStation 3 with credit applied to a customer’s credit card.
“We will watch with interest how the pilot does," said Wal-Mart spokeswoman Melissa O’Brien. She said there are currently no plans to expand the kiosks to more stores.
Bentonville, Ark.-based Wal-Mart heretofore predicated its CE business predominantly around budget-priced product, including China-made HDTV and DVD players. In 2003, Wal-Mart bowed a $39 DVD player, which many say jumpstarted wider consumer adoption of the format. Last year, the retailer unveiled a $128 Blu-ray player leading up to Black Friday.
“The knock on Wal-Mart’s electronics department, up until about a year ago, was that the company did not carry top brands,” said Pali Capital analyst Stacey Widlitz, in a note.
The departure of Circuit City left upwards of $10 billion in annual CE revenue for the taking, said analysts.
“Circuit City's business is up for grabs right now and we expect to get our share,” Gary Severson, SVP of home entertainment for Wal-Mart, told The Wall Street Journal.
Wal-Mart said retail sales (excluding Sam’s Club and foreign) ended May 1 topped $19.3 billion, up 7.7% from $17.9 billion during the same period last year ended May 2, 2008.
Widlitz said that in talks with Wal-Mart executives last year, the retailer believed it could usurp Best Buy’s perceived advantage in securing the retail void left by Circuit City.
She said third part research found that 72% of Circuit City customers cross-shop at Wal-Mart, compared to 55% at Best Buy.
“As the economy remains challenging, we expect this difference to only grow,” Widlitz said.
Best Buy does reportedly control 22% of the CE market, according to The Stevenson Co.
In February, Eduardo Castro-Wright, president of Wal-Mart USA, said the retailer would also focus on leveraging exclusive entertainment properties to take advantage of the “breadth of our assortments across multiple categories,” including CE.
“Wal-Mart is doing their best to make sure that they are the biggest beneficiaries from [Circuit City’s] bankruptcy — not Best Buy,” Widlitz said.
Indeed, The Journal reported that Best Buy underestimated consumer demand for HDTV in January and February, leading to shortages and reduced sales.