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 â€˜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 â€˜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 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 â€˜Project Hollywood.' We're focusing on new releases, Blu-ray Discs and value titles, and we're calling it â€˜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 countertop.
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 Walmart.com. 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.