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Is Walmart Really The ‘Evil Empire’? Industry Experts Weigh In

NEW YORK — Several years back
a major buying group for independent
electronics and appliance dealers
kicked off a national convention with a
clever film parody of Star Wars.

In the clip, a squadron of X-wing
fighters representing dealers attacked
and destroyed a giant Death Star bearing
the Walmart logo. The audience
erupted in cheers and war whoops.

Was the antipathy all that justified?
While the independent and specialty
A/V channels regard Walmart with a
mix of fear and loathing, some, including
The NPD Group industry analysis
VP Stephen Baker, believe the threat
is overstated. Thriving big-box independents
like P.C. Richard & Son and
ABC Warehouse have long competed
with Walmart, he argued, and while
the chain has come a long way, the discounter
is still limited in its product
depth and selection.

“Consumers like wider variety in
some categories,” he said, “and that’s
not feasible with Walmart’s model.”

Nor is the level of in-store support
associated with
the specialty channel.
Even with the advent
of online research,
“There will always be
a consumer that wants
someone to validate
their purchase,” Baker
said. And if anything, Walmart’s core
entry-level customer is in greater need
of professional advice than the sophisticated
CE consumers who shop assisted
sales floors.

Walmart is also disadvantaged by its
dearth of weekly sales circulars. Shoppers
are trained to look for Sunday inserts
and CE sales from “high-low”
pricing chains like Best
Buy and hhgregg, he said,
yet due to its everyday lowprice
strategy (EDLP),
Walmart reserves the flyers
for promotional periods
like back-to-school or

Baker also believes that “too much
has been made” of the handful of backlit
LEDs and streaming Blu-ray Disc players
that Walmart is bringing to its floors.
“A Wi-Fi Blu-ray player is not bleeding
edge,” he said. “It’s not Roku and it’s not
Slingbox. It’s the next level.”

And that next level, given the speed
of CE evolution, is morphing ever more
rapidly from luxury to necessity items
in what Baker called “the democratization
of technology.”

“It means, by definition, that you’re
selling to the mass market. Walmart’s
customer wants to watch Netflix, not
wire his entire home.”

Perhaps. But buying group executives
counter that putting advanced technologies
on a mass-merchant floor unnecessarily
devalues high-margin products and
puts pressure on all pricing as Walmart
battles Best Buy for market share. What’s
more, the grab-and-go shopping environment
and absence of expert sales assistance
robs the industry of attachment
and step-up opportunities.

“I’m not sure you can pick up on
the subtle differences between display
technologies while walking down the
aisle with a shopping cart,” said Dave Workman, executive director/COO
of the Progressive Retailers Organization
(PRO Group). “Selling a nascent
technology like edge-lit LED, or more
significantly 3D TV, into a harvesting
channel puts more downward pressure
on price. It doesn’t grow market
demand — it kills the goose before it’s
laid the golden egg.”

Mike Decker, electronics marketing
senior VP for the $12 billion Nationwide
Marketing Group, concurred.
“Walmart is taking a coveted shopper
out of the pipeline for five to seven
years and removing the opportunity for
our guys to fill the cart with HDMI cables,
mounting brackets, extended warranties,
HTiB and furniture.”

Decker, who began his career at
RCA, said he understands the manufacturer’s
need to drive share and keep
the factories humming. Nevertheless,
independent dealers are disappointed
that vendors are providing feature-rich,
state-of-the-art product to discounters
— often before they receive it — after
helping to build their brands.

“We did everything manufacturers
wanted us to do — proper displays, rigorous
training — and now they’ve taken
their eye off our channel.”

Both group execs urge independent
and specialty dealers to support manufacturers
with thoughtful channel-management
policies that provide differentiation
in the marketplace. Decker, for
one, cited Samsung as “a shining star —
a great vendor to be associated with.”

But of all the global consumer product
brands, Sony, along with Coke and
Nike, is among the most successful at
straddling multiple distribution channels
while maintaining the integrity of
its name and products. Although the
company took heat in CE for sharing
its Bravia sub-label with the mass market,
Sony says its large product portfolio
allows it to place differentiated
product where it’s most appropriate.

“Channel management is challenging,
but we’re blessed with a broad assortment
in all businesses which allows
us to minimize those issues,” explained
Ken Stevens, Sony’s consumer sales senior
VP. “We carefully consider a dealer’s
value proposition to consumers to
assure that the assortment for an A/V
specialist or salon dealer reflects that
[model], as compared to faster floors.”

Sony consumer sales VP Mark Raile
said retailers were also apprehensive about
the way Sony’s badges, which include Play-
Station and Bravia, would be represented
on the sales floor. But Walmart, he noted,
“has demonstrated an ability to put a premium
brand and product in its stores and
create value around it. They do as good
a job as anyone in that space, which has
helped alleviate distribution concerns.”

But Bob Lawrence, CEO of the $14
billion AVB/BrandSource buying group,
doesn’t believe manufacturers should be
beholden to the specialty channel, even
if it contributed to their success. Instead,
dealers should focus on expanding their
skill sets — and keeping their heads
when a supercenter arrives.

“People are ready to fold their tents
when a Walmart comes to town, but
we still have a 12- to 18-month jump
on them, and we still serve a need that
Walmart can’t provide.”

To help bolster that lead, Lawrence
advises dealers to dig deeper into what
the specialist can bring to the table, including
security systems, solar power,
whole-home controls and programmable
smart-grid solutions. “As long as we
don’t compete directly, there will always
be a place for the specialist,” he said.