Once upon a time, mass market discounters like Wal-Mart, Target and Kmart were relegated to the commodity end of the consumer electronics marketplace. But as the lines of demarcation for channel-restricted brands began to blur, more and more advanced technology devices by top-tier vendors have been making their way onto big box shelves.
In anticipation of what is expected to be another hotly contested fourth quarter, TWICE reviewed the latest CE doings at the big three discount chains. Here's what we found:
Best Buy saw the writing on the wall years ago when it began shifting its assortment upstream to avoid eventual overlap with Wal-Mart. As Gary Severson, Wal-Mart's entertainment and electronics VP noted last month during the retailer's 13th Annual Fall Analysts' and Institutional Investors' Meeting in Teaneck, N.J., the drive to better brands began in earnest two years ago with the addition of products by Apple, Samsung, Toshiba and Verizon. The portfolio build-out continued this year with the introduction of Dell computers and Sony Bravia LCD TVs.
"These brands show quality and build credibility with the customer in this space," he said. "It gives us the right to play here. And when you combine price leadership with brands, good things happen."
Indeed, Severson said Wal-Mart is outpacing its leading electronics rivals with CE comps of 4.6 percent for the past three months, compared with 1.7 percent for Best Buy and -8.0 percent for Circuit City (see story, p. 28). "We're winning here," he said.
To press its lead, Wal-Mart is incorporating vendor logos into circulars and in stores to call greater attention to its growing brand portfolio. The retailer is also "empowering" its CE department associates by giving them more product training and greater accountability. "We have a long way to go but we're starting," Severson said.
The discounter is also rolling out a new flat-panel TV wall in select stores, and is working to clear up clutter in the departments, which recently underwent a major design overhaul.
"The department remodel has paid off," Severson said. "The iPod end-caps work. We've grown our share."
Wal-Mart will also display select CE products toward the front of the stores and within seasonal holiday departments.
CE will also appear prominently in Wal-Mart's holiday advertising, including a forthcoming TV spot featuring Toshiba's HD DVD players.
Although Target was one of the early discount pioneers in small LCD TVs, it was late to the party in larger screen sizes. While panels still don't exceed 42 inches, or 768p, the retailer has since backfilled its TV wall almost exclusively with LCDs using a good-better-best selection of brands.
Two SKUs — an $1,100 Magnavox, Target's lone plasma, and a $1,000 Olevia LCD — comprise the 42-inch offering, followed by a 40-inch Sony Bravia LCD (model KDL-40S3000) that retails for $1,500.
In 37-inch LCDs, the step-up is Olevia at $800, Magnavox at $900 and Philips at $1,200. Similarly, the 32-inch offering is comprised of Olevia at $600, Magnavox at $700, and Westinghouse and Sony Bravia at $800 each. There's also a sizeable selection of 26-inch and smaller sets, a smattering of small direct-view TVs under the Memorex and Trutech labels, plus an array of Sanus wall mounts.
Going forward, Target will enhance the TV wall by extending it 8 feet, raising it 18 inches and adding an overhang shelf to reduce glare from store lighting. The increased real estate will accommodate an expanded LCD assortment and improved "Why to Buy" signing. The new TV wall debuted last month within 61 prototype CE departments in recently opened stores across the country.
Adjacent to the TV wall is the DVD player section, although Target is expected to display Sony's BDP-S300 Blu-ray Disc player in a special holiday end-cap this season. The display, which was scheduled to begin rolling out last month, is part of a deal by Target to sell Sony's Blu-ray devices exclusively within the high-definition disc player category during the fourth quarter in stores.
Elsewhere, the departments continue to be fronted by a semi-circular camera display section that sits adjacent to the checkout counter. According to Steve Eastman, Target's electronics VP/general merchandise manager, forthcoming enhancements include an 8-foot section of photo gifts from Kodak Gallery and Shutterfly and an expanded selection of cameras.
Kmart is leveraging its corporate relationship with Sears to upgrade its CE departments.
The chain has made significant strides in recent months under the management of Jonathan Magasanik, who leads the category for both chains as VP/general merchandise manager of home electronics for Sears Holdings. While still largely commodity-driven, the departments have been remodeled, relocated (to the rear center wall, between toys and major appliances), and re-assorted to catch the flat-panel wave.
Kmart's priciest panel is a 50-inch plasma TV from Philip's mass market Magnavox line that carries a $1,600 retail. Its companion plasma is a 42-inch Sylvania that sells for $840.
The balance of Kmart's TV assortment lies in LCD, led by a $900, 37-inch Olevia and 37-inch Vizio for $770.
Joining those brands in 32-inch sizes are Sony Bravia ($820), Sylvania ($700), and Magnavox ($665), while 26-inch SKUs include Sharp ($465.50) and Sony Bravia (model KDL26ML130, which was tagged at $799). Kmart also offers a smattering of 27-inch and smaller HD and SD tube TVs from Toshiba, RCA and Memorex brand, plus a lone CRT rear-projection set from Akai that sells for $765.
Portable DVD players and Zune and iPod personal music players are featured within a display case located near the checkout counter, while XM portable receivers (Delphi Roady XT, $50) and navigation devices (Magellan Maestro 3100, $190) also receive their own displays.
Musical toys are also merchandised within the department, sharing an aisle with a selection of blank media and low-end DVD players and home theater in a box systems. Video games fill a gondola-length glass display facing Kmart's DVD software selection, while the 50-inch Magnavox plasma also sits on the power aisle at the entrance to the department, serving as a traffic driver along with a stack of Curtis 2.1 channel HTiBs with DVD player ($70) and iLive iPod boomboxes ($90).
Kmart, like Wal-Mart and Target, also offers extended service or product replacement plans on select products.