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Is Walmart Really The ‘Evil Empire’?

NEW YORK – Several years back a major buying group for
independent electronics and appliance dealers kicked off a national convention
with a clever film parody of Star Wars.

In the clip, a squadron of X-wing fighters representing dealers
attacked and destroyed a giant Death Star bearing the Walmart logo. The
audience erupted in cheers and war whoops.

Was the antipathy all that justified? While the independent and
specialty A/V channels regard Walmart with a mix of fear and loathing, some,
including The NPD Group industry analysis VP Stephen Baker, believe the threat
is overstated. Thriving big-box independents like P.C. Richard & Son and
ABC Warehouse have long competed with Walmart, he argued, and while the chain
has come a long way, the discounter is still limited in its product depth and

“Consumers like wider variety in some categories,” he said, “and
that’s not feasible with Walmart’s model.”

Nor is the level of in-store support associated with the
specialty channel. Even with the advent of online research, “There will always
be a consumer that wants someone to validate their purchase,” Baker said. And
if anything, Walmart’s core entry-level customer is in greater need of
professional advice than the sophisticated CE consumers who shop assisted sales

Walmart is also disadvantaged by its dearth of weekly sales
circulars. Shoppers are trained to look for Sunday inserts and CE sales from
“high-low” pricing chains like Best Buy and hhgregg, he said, yet due to its
everyday low-price strategy (EDLP), Walmart reserves the flyers for promotional
periods like back-to-school or holiday.

 Baker also believes that
“too much has been made” of the handful of backlit LEDs and streaming Blu-ray
Disc players that Walmart is bringing to its floors. “A Wi-Fi Blu-ray player is
not bleeding edge,” he said. “It’s not Roku and it’s not Slingbox. It’s the
next level.”

And that next level, given the speed of CE evolution, is morphing
ever more rapidly from luxury to necessity items in what Baker called “the
democratization of technology.”

“It means, by definition, that you’re selling to the mass market.
Walmart’s customer wants to watch Netflix, not wire his entire home.”

Perhaps. But buying group executives counter that putting
advanced technologies on a mass-merchant floor unnecessarily devalues
high-margin products and puts pressure on all pricing as Walmart battles Best
Buy for market share. What’s more, the grab-and-go shopping environment and
absence of expert sales assistance robs the industry of attachment and step-up

“I’m not sure you can pick up on the subtle differences between
display technologies while walking down the aisle with a shopping cart,” said
Dave Workman, executive director/COO of the Progressive Retailers Organization
(PRO Group). “Selling a nascent technology like edge-lit LED, or more
significantly 3D TV, into a harvesting channel puts more downward pressure on
price. It doesn’t grow market demand – it kills the goose before it’s laid the
golden egg.”

Mike Decker, electronics marketing senior VP for the $12 billion
Nationwide Marketing Group, concurred. “Walmart is taking a coveted shopper out
of the pipeline for five to seven years and removing the opportunity for our
guys to fill the cart with HDMI cables, mounting brackets, extended warranties,
HTiB and furniture.”

Decker, who began his career at RCA, said he understands the
manufacturer’s need to drive share and keep the factories humming.
Nevertheless, independent dealers are disappointed that vendors are providing
feature-rich, state-of-the-art product to discounters – often before they
receive it – after helping to build their brands.

“We did everything manufacturers wanted us to do – proper
displays, rigorous training – and now they’ve taken their eye off our channel.”

Both group execs urge independent and specialty dealers to
support manufacturers with thoughtful channel-management policies that provide
differentiation in the marketplace. Decker, for one, cited Samsung as “a
shining star – a great vendor to be associated with.”

But of all the global consumer product brands, Sony, along with
Coke and Nike, is among the most successful at straddling multiple distribution
channels while maintaining the integrity of its name and products. Although the
company took heat in CE for sharing its Bravia sub-label with the mass market,
Sony says its large product portfolio allows it to place differentiated product
where it’s most appropriate.

“Channel management is challenging, but we’re blessed with a
broad assortment in all businesses which allows us to minimize those issues,”
explained Ken Stevens, Sony’s consumer sales senior VP. “We carefully consider
a dealer’s value proposition to consumers to assure that the assortment for an
A/V specialist or salon dealer reflects that [model], as compared to faster

 Sony consumer sales VP
Mark Raile said retailers were also apprehensive about the way Sony’s badges,
which include PlayStation and Bravia, would be represented on the sales floor.
But Walmart, he noted, “has demonstrated an ability to put a premium brand and
product in its stores and create value around it. They do as good a job as
anyone in that space, which has helped alleviate distribution concerns.”

But Bob Lawrence, CEO of the $14 billion AVB/BrandSource buying
group, doesn’t believe manufacturers should be beholden to the specialty
channel, even if it contributed to their success. Instead, dealers should focus
on expanding their skill sets – and keeping their heads when a supercenter

“People are ready to fold their tents when a Walmart comes to
town, but we still have a 12- to 18-month jump on them, and we still serve a
need that Walmart can’t provide.”

To help bolster that lead, Lawrence advises dealers to dig deeper
into what the specialist can bring to the table, including security systems,
solar power, whole-home controls and programmable smart-grid solutions. “As
long as we don’t compete directly, there will always be a place for the
specialist,” he said.