Your browser is out-of-date!

Update your browser to view this website correctly. Update my browser now


TVs Anchor New Strategy

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 step-up 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

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 has a dedicated Vudu Web page.”

For the future, he said, “we’re working with the studios to
create very compelling offers. 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 and smaller electronics items kept under glass or chained to the

On this afternoon, a sale of a big-screen TV would have to be
initiated by the customer.

The lone exception to the LCD TVs on display was a single plasma
TV SKU – a 50-inch 768p Philips model (50PFP5332D) carrying a “Rollback” price
tag of $1,099. The model clearly been in inventory a while since

Philips exited the plasma category several years ago, prior to licensing the
brand to Funai for TVs in the U.S. and Canada.

Displayed TV brands included a mix of top-tier labels, including
Samsung, Sharp, Sony, Vizio, LG and Philips. Supporting second-tier lines
included Sanyo, Emerson, RCA, and Polaroid.

Gone were lower-tier no-name opening price point (OPP) brands
that remain as featured items on Also absent were any iLo
private-label-branded sets.

Analysts who monitor the chain said the lesser-known OPP brands
are brought in around crucial holiday sales periods and for special promotions.

The assortment was heavily weighted in favor of Vizio (12 SKUs),
Samsung (seven SKUs), Sanyo (five SKUs) and Philips (five SKUs including both
PCE and P&F USA items). Among the rest, Sony, LG and Emerson each had three
SKUs, RCA had two SKUs and Polaroid had one SKU.

By screen size the biggest assortment was in 32-inch (12 SKUs),
followed by the 46- to 47-inch segment (eight SKUs); the 40- to 42-inch segment
(six SKUs); 26-inch models (four SKUs); 19-inch models (four SKUs); 55-, 50-
and 22-inch models (two SKUs each); and one 52-inch model.

Display models were all mounted against a wall rack in two long
perpendicular rows. Sets were more or less grouped together by screen size in
descending order starting from the left with a 55-inch Samsung at $1,488 (among
the labeled models) and concluding at the right with a 19-inch 768p Emerson “Rollback”
item at $168.

Up front in the department were three unmarked big-screen
displays from Samsung and Sharp that appeared to be there merely to display
Blu-ray Disc players from Vizio, Samsung and Sony, and placed on a shelf below.

Given the apparent emphasis on moving some older inventory and
the lack of boxed goods on the floor, the department appeared to be preparing
for the transition to the new merchandising direction discussed by Walmart
executives, as evidenced in our companion reports in this issue.