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 selection.
"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 floors.
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 opportunities.
"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 floors."
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 arrives.
"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.