Wal-Mart is adding Sony TVs to its video assortment, prompting the manufacturer to begin direct distribution to the retail giant.
The first fruits of the pact are four Sony models that were set to hit a limited number of stores earlier this month.
According to Don Harris, executive VP/general merchandise for Wal-Mart's flagship stores, the partners will test the TVs — and the new supply chain — in 200 to 250 locations before extending them nationwide.
"We've done a lot of business with Sony over the years" — including imaging, HTiB, personal audio and accessories — "but we've never sold direct until now," he said at a recent investor conference.
The change in distribution and new TV SKUs, announced at Wal-Mart's annual shareholders meeting this month, underscores recent strides the world's largest retailer has made in pursuit of the CE market.
The low-cost leviathan, long content to conduct a commodity CE business, surprised specialty A/V dealers out of their complacency late last year with word of a 1,500-store test of HDTV, along with pockets of plasma displays. (See TWICE, Oct. 14, 2002, p. 1.)
At the same time, a seemingly inexorable brick-and-mortar build-out helped propel CE sales 13 percent at Wal-Mart's flagship stores last year, unseating Circuit City as the second-largest electronics retailer in the land and placing the discount chain within striking distance of Best Buy stores. (Indeed, factor in Sam's Club's $2.5 billion in 2002 CE revenue and the race becomes a dead heat.)
More recently, Wal-Mart has restated its intentions to rule the electronics roost. In its 2003 annual report, the $245 billion company cited CE as a category that can help it maintain its double-digit growth through improved merchandising and the addition of new product lines.
"Our product-development team, working with Wal-Mart buyers, is driving significant improvement in key product categories such as apparel, domestics and electronics," noted president/CEO Lee Scott. "As this improvement continues, we will further encourage our existing customers to broaden their shopping with us. In other words, we are increasingly seeing that customers who shop with us for food and basic household supplies are adding apparel and electronics to their shopping basket."
Tom Coughlin, newly named executive VP/vice chairman of Wal-Mart Stores Inc. (USA), also stressed CE in his remarks and promised to raise the retailer's high-tech quotient. "We will … continue to feature new technology in our electronics department," he wrote. "With DVD players, we entered the market at an early point and did very well. Now we're doing the same with flat-screen TVs and new advances in wireless technology."
Executive VP Harris underscored the significance of the shift in merchandising strategy. "This represents a change," he observed. "We once thought we wouldn't sell certain products until they reached certain price points. We no longer think that way, but that doesn't mean we're taking riskier positions now. It's a simple matter of merchandising to where we know the consumer is going."
CE was once again highlighted at Wal-Mart's annual shareholders meeting on June 6. According to attendee Aram Rubinson, a retail analyst with Banc of America Securities, electronics was the "most talked about category" in hardlines, as the company displayed a dump bin featuring $5.88 DVDs and trumpeted its direct line to Sony products.
Harris boasted that Wal-Mart is consistently selling 1 million DVD movies priced under $6 each week. "DVDs are working for us," he told a Credit Suisse First Boston conference in New York. "It's a bit of a treasure hunt," he said of the dump bins, "but it's sensational."