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Walmart Balancing Mass And Class Amid Long Recession

6/06/2011 02:44:20 PM Eastern

BENTONVILLE, ARK. - After six years of development, Walmart's
CE business reached a pinnacle of mass-merchant assortment and display within
its Project Impact stores in 2010.

The program, designed in part to
attract higher-income customers, provided wide uncluttered aisles, a tighter
assortment, improved lighting and signage, and emphasized a handful of core
merchandise categories, including CE.

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There, within the discounters'
entertainment departments, shoppers discovered some decidedly un-discount
store-like enticements, including large-screen LED and connected TVs; tier-one
brands like Apple, LG and Samsung; an expansive selection of smartphones and
homenetworking gear; and staffed demo stations.

While CE specialty
retailers shuddered at the prospect of declining market share and margins,
circumstances proved that even the world's largest retailer was not immune to
the macro forces impacting the industry. Falling average selling prices (ASPs),
particularly in TV, were crimping Walmart comps; the extended recession and
spiraling cost of food and gas took a disproportionate toll on its core customer
base; and Amazon.com became an even more formidable competitor.

In response, the company returned to its everyday-lowprice (EDLP) roots,
reemphasized its value message, and began returning some 8,500 previously edited
general merchandise SKUs to store shelves, taking some CE floor space with it.

The changes, acknowledged Gary Severson, home entertainment senior VP
for Walmart U.S., have required a number of mid-course corrections, including an
increased selection of opening price-point products; a culling of legacy and
slower-moving items such as boom boxes and landline phones; a small reduction in
music and movie space; and an enhanced web strategy that includes more
onlineonly SKUs.

What there won't be, he stressed, is any cutback in
overall CE assortment, or any lessening of Walmart's focus on tier-one brands
and advanced technologies like tablets, 3DTV and smartphones.

"Brands
are really important to us," Severson told TWICE. "With higher prices for food
and gasoline, some core customers may trade themselves down, but we have seen
really good increases on tier-one name brands at really good prices."

The trend is readily evident in TV, where Walmart's tierone share is
"solid and growing," and smart, 3D and LED models are gaining traction.

3D in particular is "starting to check," he said, after the company
began rolling out Vizio, LG and Sony SKUs last Christmas. Most of the stores
that stock 3DTVs offer passive technology models that are merchandised with
glasses, and their 3D capability is positioned as a product feature rather than
a separate category. However, 3D is merchandised separately with live displays
in about 500 test locations, although it's still too early to determine which
presentation is more effective, Severson said.

Similarly, connected TV
is "consistently growing," he noted, although the price delta for smart models
and the high cost of content is limiting the category's potential. "Customers
are getting it," he said. "The question is, how much of a premium are they
willing to pay? It will evolve into a good feature that has a reasonable step,
but there's too much of a premium now."

The same holds true for Vudu,
the IPTV movie service and platform developer that Walmart acquired one year
ago. The business has grown several fold since then, as the service is added to
new screens and devices and the company hones its ability to engage the
customer. "We're layering on new customers every week and the feedback has been
very positive," Severson said, "but the studios want a little too much and it's
still too high a premium."

Conversely, Walmart's TV assortment still
includes plasma and LCD models in certain larger sizes "where the consumer is
screaming value," he said.

The TV wall itself is unchanged in length,
although it now holds larger screen sizes, may soon lose some smaller displays,
and features more integrated accessories like HDMI cables and mounts. "I feel
pretty good about the amount of space devoted to the TV wall now," Severson
said.

More noticeable is the addition this month of a dedicated tablet
PC area with an iPad end cap serving as the section's lead-in. Severson regards
tablets as an assortment business rather than an item business, and held off on
the section's rollout until additional models began shipping this month. The
tablets will be cross merchandised with accessories on a side counter, and
product will either be tethered or under glass depending on the store, he
said.

An expanded assortment of e-readers is also in the offing, as well
as a greater selection of mobile, gaming and video accessories. "The customer
wants more and better solutions for accessorizing hardware," he observed,
prompting more brand- and model-specific accessories in smartphones and the
solution-based accessories embedded in the TV wall.

Walmart is also
tweaking its mobile business by developing a "grab-and-go solution" for its
exclusive Family Mobile post-paid plan and handsets from TMobile, to make for an
easier checkout, and will introduce additional hybrid plans like Family Mobile
that require monthly payments but no contracts.

Elsewhere , the company
is bolstering its e-c ommerce assortment and will move some categories out of
the stores and onto the web. "The business is shifting more online for some
categories, and we will adjust our presentation accordingly," Severson noted.
"There is a natural evolution where in some instances the customer is more
comfortable shopping online than in stores."

But that's not to imply a
brick-andmortar retrenchment. "We're not abandoning our in-store assortment," he
said. "You need to have product in the store."

Looking at the industry
as a whole, Severson described CE as "fairly challenged right now" as it works
through content delivery issues, and anticipates a "very competitive," albeit
improving, second half. "It will get a little better," he said.

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