Tuesday, May 15, 2007

Wal-Mart Steps Up CE Presence

According to several reports, U.S. retail giant Wal-Mart is stepping up its consumer electronics offerings, adding more flat-panel TVs from brands like Philips, Sony, and Samsung; and bringing on VoIP products from Skype, including calling cards. I was unable to confirm just yet if the additional SKUs will be available north of the border as well (stay tuned). Either way, this is big news for fellow CE giants, not to mention independents, both of which have been finding it hard to compete with Wal-Mart’s massive price cuts.

Let’s put things in perspective: right now at Future Shop, a brand-name 32-inch widescreen, high-definition LCD can be purchased for just shy of about $1,200. A no-name model is available for $700. A year ago, the same product would have been about double that!

Last month, Wal-Mart Canada added the Prive brand of LCD TVs to its roster: budget-conscious consumers can grab a 32-inch model for a measly $470. The CEO of Prive’s parent company, SOYO, commented at that time that the company was “happy” to be part of Wal-Mart’s “aggressive plan to build its consumer electronics division.” Aggressive is an understatement.

At this rate, we’re bound to see a “buy one, get one free” sale on HDTVs by Christmas. The mere thought deserves a chuckle, but this is a serious issue. A breaking point is going to be reached at some point in the near future. It’s already begun to happen: Circuit City announced a massive restructuring plan in February, closing a whole whack of stores in both the U.S. and Canada. And the retailer wasn’t shy about the reason, citing “intensified gross margin pressures” experienced with flat-panels TVs in the third quarter.

Of course it can be argued that customers won’t get the same level of product knowledge and customer service through Wal-Mart than they would a specialized, independent retailer; or even a CE-targeted big-box one. But it appears that Wal-Mart is ramping up its staff product knowledge as well: reports online claim that U.S. employees have been put through extensive product and customer service training within the consumer electronics department.

Wal-Mart obviously means business in this area. How will this bode for traditional CE retailers, not to mention the rapidly dropping prices of product like HDTVs? We’d love to hear your comments.

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