Wal-Mart Enters Majap Market With GE Appliance Pilot Program

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BENTONVILLE, ARK. -- Wal-Mart, the world's largest retailer, will begin selling major appliances later this month under a pilot program with GE.

The market test, which will include about a dozen Wal-Mart Supercenters by year's end, will encompass Hotpoint, GE and GE Profile brand refrigerators, freezers, ranges, over-the-range microwaves, dishwashers, washing machines and dryers.

The trial effort mirrors GE's arrangement with The Home Depot in that the manufacturer will assume all warehousing, delivery and installation duties. Wal-Mart will similarly display about 40 appliances in its stores, offer another 150 through in-store GE kiosks, and will have a limited amount of inventory on hand for consumers inclined to carry their own white goods home. For everyone else, GE will make all deliveries, whether the products are ordered over the kiosk computer terminals or purchased through a Wal-Mart salesperson.

The announcement comes just weeks after Circuit City, the nation's No. 2 majap merchant, said it was abandoning the category. A Wal-Mart spokesman said that while the timing was "advantageous," the appliance alliance had been in the works for "quite some time."

The spokesman continued, "We have a long, very good relationship with GE, and are always looking for new opportunities to add value for our customers. This test is to see if we can really deliver quality merchandise at a good price."

The initial test markets will include Texas, Arizona and Oklahoma, and additional stores around the country are expected to participate in the program next year.

Markets were selected based on their white-goods "growth potential" and availability of space in area stores, the chain's spokesman said. Demonstration models will generally appear toward the front of the Wal-Mart units, where the company provides leased space for banks, eyewear outlets and other specialty shops.

Wal-Mart said the white-goods area will not be leased to GE, and although the manufacturer will carry most of the inventory, all sales will be credited to the merchant. The Wal-Mart spokesman added that it was too early to tell if sales associates would receive special training or compensation to sell major appliances, or whether the retailer would eventually carry lines from other manufacturers.

According to a GE spokesperson, its arrangements with Wal-Mart and The Home Depot underscore the fact that "something as unsexy as logistics has become the game changer. We can deliver a 300-pound refrigerator to any home in America, and that brings value to a national customer like Wal-Mart."

Prudential Securities analyst Mohammed Ali concurred. "GE's precision fulfillment system is unmatchable. They can almost guarantee that the consumer gets the product they want when they want it," he said. Although Ali was "a little surprised" that Wal-Mart would enter the white-goods waters, he acknowledged that the mass merchant is a "pretty smart retailer" and that the alliance is a "blow-away deal."

Specifically, Ali explained, GE is allowing merchants like Wal-Mart and Home Depot the luxury of virtual sales. "It's a terrific deal for retailers. There's no capital commitment, and they're registering sales of products that aren't physically there. It's a new way of doing business."

By contrast, analysts believe the biggest losers in the deal, at least on the retail side, are Sears and the independent dealers. As Aram Rubinson, a managing director at PaineWebber observed, "I would think the Sears customer is closest to Wal-Mart's. That's where the market share comes from. It goes right to Sears' jugular."

As for the independents, GE said it remains committed to a channel that's been part of the family for years. "They're a very important part of our business," the company's spokesman said, "with relationships that go back generations. [CEO] Larry Johnston's dad sold GE appliances in a small, independent dealership, and he grew up in this business from an independent's perspective.

"We want to add value to our channel partners, not add conflict," he continued. "But you have to make certain that your products are where the consumer would like to have them available."

Wal-Mart too has long carried a broad line of GE products, including microwave ovens, room air conditioners and lighting. As part of a separate licensing arrangement, the discount chain said it will expand its assortment of GE-branded housewares to include Eureka-manufactured vacuum cleaners, plus toasters, irons and blenders from Hamilton Beach/Proctor-Silex.

For PaineWebber's Rubinson, the biggest surprise of the new appliance partnership was Wall Street's nonchalance. "It was not taken as seriously as it should," he said. "This is a major event."


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