TVs Anchor New Strategy

By Greg Tarr and Alan Wolf On Jun 7 2010 - 4:01am




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.”

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