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TVs Anchor New Strategy

6/07/2010 12:01:00 AM Eastern

NEW YORK — As the anchor
category of Walmart’s
consumer electronics departments,
TVs factor prominently
in the company’s more recent
move into better-featured
models and top-tier brands.

The chain is revamping
the department in larger
outlets to display a stepup
product mix , and is
padding profitability from
its low-price product strategy
with connected entertainment
services that will offer residual income from ongoing online
movie rentals and sales.

Central to the plan is bringing in
larger screen sizes, popular brands and
sets the chain can price promote to the
masses.

Kevin O’Connor, Walmart consumer
electronics VP, told TWICE: “The
customer wants to upgrade. We shifted
very quickly from 32-inch, which used
to be the ‘sweet spot,’ to 42-inch and
above. Larger sizes are more important
to us as the technology improves and
prices come down. We’ve also brought
out a larger assortment of brands and
display technologies, including LCD,
LED and IPTV.”

Models in the chain’s assortment are
mix of derivative SKUs, from manufacturers,
such as Samsung, looking
to shield margins and other retailers
from model-for-model price comparisons
with the discount chain, to regular
open inventory from brands including
LG that choose to keep all dealers
competitive with a breadth of SKUs.

“Some of our models are derivative
and some are open line,” O’Connor explained.
“We also have some restricted
brands like Vizio and Sanyo, but no
private label. iLO is gone. We found
that a lot of brands could provide us
with products at competitive price
points.”

Analysts said that Walmart’s expansion
of TV is indicative of the market
direction.

“I think Walmart has consolidated
their core OPP lineup pretty well, especially
since it is possible to get a good
range of entry price points from even
some of the step-up-tier brands, particularly
Vizio,” said Paul Gagnon, DisplaySearch
North American TV research
director. “There is certainly a lot
of pressure on some of the entry brands
to prove their value to be floored on a
consistent basis and not just for spot
promotions.”

“This is the TV business now,” said
Tamaryn Pratt, principal of Quixel Research.
“It’s no longer the advanced TV
market. Flat-panel TVs are becoming
commodities, and they are available everywhere
from Walmart to Toys “R”
Us to QuickStops.”

“People seem to forget that Walmart
was No. 1 in the bad-old-tube days,”
added Stephen Baker, NPD industry
analysis VP. “There’s no reason that
going forward they can’t have a great
selection of brands and have the right
products there. It’s key that as their
product selection evolves that while
they may not get everything first, they
don’t want to be on the backside of the
bell curve in getting new products and
technologies.”

As in the past, the TV merchandising
plan, O’Connor said, places models
together by screen size.

“We find that the customer likes to shop by size and price,” he said. “They
want to see what they can get for their
money.”

In select outlets, products offering
new, hot technologies and features
are being placed in “New Technology
HDTV Centers.”

One such technology is IPTV, where
Walmart recently made a major investment
in the future by acquiring online
movie service and technology enabler
Vudu, which the chain is using to
stay on top of the rapidly transforming
home video market — a cash cow for
the chain for years.

According to Greg Hall, media and
services VP: “As a leader in entertainment,
we came right out of the gate with
Vudu and were the only service with
‘Avatar’ day-and-date of the DVD, and
we’re already doing some promotional
things. We’re doing promotions on LG
Blu-ray Disc players, and Walmart.com
has a dedicated Vudu Web page.”

For the future, he said, “we’re working
with the studios to create very compelling
off ers. Work needs to be done
to create value out of the digital purchase,
so we’re partnering with the studios
and using our experience with
physical media.”

On the manufacturer side, Vudu
launch partners carrying the streaming
service in TVs and/or Blu-ray players
include LG Electronics, Mitsubishi
and Vizio.

New brands coming on board this
year include Samsung, Sanyo, Sharp
and Toshiba.

Vudu has also developed a Vudu
Apps platform that will enable Internet
access for interested manufacturers.

This provides access to a wide range
of services and applications, such as
streaming video, music on demand,
photo browsing, social networking and
more, including popular services like
Pandora, Picasa, Flickr, Dailymotion
and leading news providers.

Vudu Apps will initially launch on
TVs from Mitsubishi, Sanyo, Sharp
and Toshiba, as well as Blu-ray players
from Toshiba and Vizio.

“We have great partnerships with
consumer electronics suppliers, and
we’re working to make the Vudu app
broadly available. We’re working on
those suppliers where it’s not yet represented,”
Hall told TWICE.

“Eventually we expect it will be available
on all three screens [TVs, PCs,
cellphones].”

“We’re not downsizing physical media.
We’re using the physical disc to get
people to try Vudu, and will continue
to grow both formats,” he continued.
“In fact, we’re doing a full revamp of the
music and movie section, called ‘Project
Hollywood.’ We’re focusing on new
releases, Blu-ray Discs and value titles,
and we’re calling it ‘New, Blu and Value.’
The remodel is going very well —
it’s in about 550 stores now and we expect
it will be chain-wide by the fall.”

On building the Vudu brand, Gary
Severson, Walmart senior VP home
entertainment, said: “We are pursuing
all options on growing exposure to
the Vudu brand. It’s on TVs now, and
I anticipate that it will cover all three
screens at some point in time.”

Concerning competitive digital
services, Severson said: “I believe the customer should have choice, and
there are alternatives on our floor today.
It’s our responsibility to add value
for the customer, and we hope
their choice is with us. However, [unlike
others] we’re not putting our
name on it.”

As for 3DTV, Severson said: “We
plan to introduce it in select stores in
the fourth quarter to learn and understand
it. It could be earlier, it could be
later, depending on whether people
[vendors] bring it when they say they
will and at the prices they’ve indicated.”

“It won’t necessarily be a big business
for us, and I’m not sure if it will be big
for the industry,” he continued. “There
are too many variables. But as standards
are created, glasses become standardized,
and more content becomes
available, the customer will ultimately
decide. I will tell you this — there are
some technologies that you look at and
you say, ‘That’s not very interesting.’ 3D
is not one of them.”