Discounters like Wal-Mart and Costco are proving to be "increasingly formidable competitors" for CE specialty chains like Best Buy and Circuit City, according to a recent report from David Strasser, a retail analyst at Banc of America Securities.
Strasser's findings are based on Steveson Co. data from the second quarter of 2007 that "shows the discount channel making strong gains led by Wal-Mart and Costco." The report also said that Best Buy's results were "mixed" and that "Circuit City lost share in most every category."
The report called on these specialty CE chains to "differentiate (via services) to drive value."
Wal-Mart and Costco respectively gained 2.9 and 3.1 percent market share in the larger flat-panel (40-inch to 60-inch models) category and saw gains of 6.1 percent and 3.2 percent in smaller (39-inches and below) flat-panel TVs. Meanwhile, Best Buy and Circuit City lost 3.5 percent and 3.7 percent market share respectively in the larger category and lost 6 percent and 5.8 percent share each in the smaller flat-panel category.
Strasser attributed Best Buy's losses in the larger flat-panel category to "heightened seasonality effects driven by the selling focus of 1080p coupled with consumers' expectations of lower prices during the holiday selling season, thereby postponing demand."