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Walmart Balancing Mass And Class Amid Long Recession


After six years of development,
Walmart’s CE business reached a pinnacle
of mass-merchant assortment and display
within its Project Impact stores in 2010.

The program, designed in part to attract higher-income
customers, provided wide uncluttered aisles, a tighter assortment,
improved lighting and signage, and emphasized
a handful of core merchandise categories, including CE.

There, within the discounters’ entertainment
departments, shoppers
discovered some decidedly un-discount
store-like enticements, including
large-screen LED and connected
TVs; tier-one brands like Apple, LG
and Samsung; an expansive selection
of smartphones and homenetworking
gear; and staffed demo

While CE specialty retailers shuddered at the prospect
of declining market share and margins, circumstances
proved that even the world’s largest retailer was not immune
to the macro forces impacting the industry. Falling
average selling prices (ASPs), particularly in TV, were
crimping Walmart comps; the extended recession and
spiraling cost of food and gas took a disproportionate toll
on its core customer base; and

became an
even more formidable competitor.

In response, the company returned to its everyday-lowprice
(EDLP) roots, reemphasized its value message, and
began returning some 8,500 previously edited general
merchandise SKUs to store shelves, taking some CE floor
space with it.

The changes, acknowledged Gary Severson, home
entertainment senior VP for Walmart U.S., have required
a number of mid-course corrections,
including an increased selection
of opening price-point products; a
culling of legacy and slower-moving
items such as boom boxes and landline
phones; a small reduction in music and movie space;
and an enhanced web strategy that includes more onlineonly

What there won’t be, he stressed, is any cutback in
overall CE assortment, or any lessening of Walmart’s focus
on tier-one brands and advanced technologies like
tablets, 3DTV and smartphones.

“Brands are really important to us,” Severson told
TWICE. “With higher prices for food and gasoline, some
core customers may trade themselves down, but we have
seen really good increases on tier-one name brands at
really good prices.”

The trend is readily evident in TV, where Walmart’s tierone
share is “solid and growing,” and smart, 3D and LED
models are gaining traction.

3D in particular is “starting to check,” he said, after
the company began rolling out Vizio, LG and Sony
SKUs last Christmas. Most of the stores that stock
3DTVs offer passive technology models that are
merchandised with glasses, and their 3D capability
is positioned as a product feature rather than a
separate category. However, 3D is merchandised
separately with live displays in about 500 test locations,
although it’s still too early to determine which
presentation is more effective, Severson said.

Similarly, connected TV is “consistently growing,”
he noted, although the price delta for smart
models and the high cost of content is limiting the
category’s potential. “Customers are getting it,” he
said. “The question is, how much of a premium are
they willing to pay? It will evolve into a good feature
that has a reasonable step, but there’s too much of
a premium now.”

The same holds true for Vudu, the IPTV movie service
and platform developer that Walmart acquired
one year ago. The business has grown several fold
since then, as the service is added to new screens
and devices and the company hones its ability to
engage the customer. “We’re layering on new customers
every week and the feedback has been very
positive,” Severson said, “but the studios want a
little too much and it’s still too high a premium.”

Conversely, Walmart’s TV assortment still includes
plasma and LCD models in certain larger
sizes “where the consumer is screaming value,”
he said.

The TV wall itself is unchanged in length, although
it now holds larger screen sizes, may soon
lose some smaller displays, and features more integrated
accessories like HDMI cables and mounts.
“I feel pretty good about the amount of space devoted
to the TV wall now,” Severson said.

More noticeable is the addition this month of a
dedicated tablet PC area with an iPad end cap
serving as the section’s lead-in. Severson regards
tablets as an assortment business rather than an
item business, and held off on the section’s rollout
until additional models began shipping this
month. The tablets will be cross merchandised
with accessories on a side counter, and product
will either be tethered or under glass depending
on the store, he said.

An expanded assortment of e-readers
is also in the offing, as well as a
greater selection of mobile, gaming
and video accessories. “The customer
wants more and better solutions for accessorizing
hardware,” he observed,
prompting more brand- and model-specific
accessories in smartphones and
the solution-based accessories embedded
in the TV wall.

Walmart is also tweaking its mobile
business by developing a “grab-and-go
solution” for its exclusive Family Mobile
post-paid plan and handsets from TMobile,
to make
for an easier
checkout, and
will introduce
additional hybrid
plans like Family
Mobile that
require monthly
payments but no

Elsewhere ,
the company is
bolstering its
e-c ommerce
assortment and
will move some
categories out
of the stores
and onto the
web. “The business
is shifting
more online for
some categories, and we will adjust
our presentation accordingly,” Severson
noted. “There is a natural evolution
where in some instances the customer
is more comfortable shopping online
than in stores.”

But that’s not to imply a brick-andmortar
retrenchment. “We’re not abandoning
our in-store assortment,” he said.
“You need to have product in the store.”

Looking at the industry as a whole,
Severson described CE as “fairly challenged
right now” as it works through
content delivery issues, and anticipates
a “very competitive,” albeit improving,
second half. “It will get a little
better,” he said.