story by Kim Souza
Gigantic screen televisions are fun to look at in a store, but on a space-to-sales ratio they rank well below tablets and mobile phones. That is why consumers can expect to see more space in their Walmart Supercenter dedicated to faster-selling mobile phones, tablets and other digital accessories.
“Electronics are a great piece of business for us, albeit a challenging category for some time now,” Bill Simon CEO of Wal-Mart U.S., said during the recent question and answer session with the media in conjunction to the retailer’s shareholder events (June 3-6).
Simon was asked how the retailer is managing its entertainment category, which remains challenged because of deflationary margins and slowed innovation. While Simon admits the ongoing challenges, the retailer is not making radical changes. They are actively tweaking the space dedicated to certain entertainment items.
“We are trying to look at this segment more holistically. Forget online and offline and think more about assortment offering and connectivity. There are certain items we can show in the store, that we could sell more breadth of online and there are other items that we can sell and deliver immediately to the customer in-store,” Simon said.
Stephen Quinn, executive vice president of marketing at Walmart U.S., said the retailer is launching net modular sets within its electronics and entertainment departments. These sets have already been placed inside local supercenters in Northwest Arkansas.
“One of the most vital things we do is make sure our in-store presentations fit customer needs. Electronics are a challenging industry,” Quinn said. “The new sets in our local stores adjust our space-to-sales ratio better and we are leaning in toward the growth areas.”
CHANGING THE MIX, PRESENTATION
Wal-Mart said wireless devices, tablets and mobile connectivity items will have more dominant presentation space in its stores. The space also will include bigger brand presentations, and newer and more popular brands. Those brands will be featured in more prominent store locations to better ensure customer awareness.
“We are looking at the physical space dedicated to the electronics and we see there are some items in the category growing twice as fast as those items in decline, so we are making sure the product mix and assortment is right for what customers want. We are also working closely with our partners at Walmart.com to try and figure out what is the best way to present our online offerings to the customer when they are in-store,” Quinn said.
Simon said the dedicated space for entertainment in a supercenter is not changing, but they are adjusting the product displays within that dedicated area. He said there is still value in the $5 DVD and music CD bins as the retailers sells a ton of those items each week.
“Overall it’s a difficult, challenging business, but we feel good about the share position we are in and we are going to try and build upon that share going forward,” Quinn said.
Jason Long, CEO of Shift Marketing Group, said in many ways Wal-Mart is a victim of its own success in the electronics space and now they are victims of the latest, greatest thing.
“There was a time when Wal-Mart was not competitive in electronics, but they began to pull in the best brands and broad selections with better pricing than other competitors, taking market share. But how many big screen televisions do families really need. The lack of innovation from Apple and everyone else has stagnated this category,” Long said.
He said giving top brands more prominence in the store is like a hybrid version of the store-within-a-store format that has been popular at Best Buy.
One area Long believes Wal-Mart could step up its game is through theme displays around some pop culture phenomenons like “Frozen” or “Star Wars,” especially if there is more room to spare.
“At Target, ‘Frozen’ outsold in a month more copies than ‘Finding Nemo’ sold in a full year. They said the soundtrack from ‘Frozen’ outsold all other CDs in total in that month. You would have to think this kind of popularity would be a huge traffic driver in stores,” Long said.
SELLING SERVICES, APPLIANCES
In the past Wal-Mart looked to sell services to help boost entertainment sales. One of the more recent programs is a game trade-in service. It has been mildly successful with 115,000 games traded in for cash at Walmart stores, according to Duncan Mac Naughton, chief merchandising officer for Walmart U.S.
Wal-Mart said there were roughly 880 million video games sitting in homes collecting dust, when the program was announced. This buy-back program is designed to get traffic in-stores trading and then spending the money paid on new games or upgraded video gaming equipment. The refurbished games are slated to make their way to Wal-Mart shelves this summer.
Mac Naughton said new game releases drive heavy traffic into the store, and the buyback program will allow more gamers to trade-up over time and increase the overall size of the $2 billion market. Other retailers like Radio Shack recently announced new services as a way to drive traffic into their electronics stores. Dallas-based Radio Shack unveiled a new smartphone “fix it” service last week in its stores. The in-store, same-day service on popular mobile devices is performed at “Fix It Here” stations while the customer waits. Radio Shack has added stations to more than 284 company and franchise stores as part of a pilot program. Results are encouraging enough to expand it to 700 stores by year-end, said CEO Joe Magnacca.
Long said he is not sure how many people go to Radio Shack to buy their smartphones and service plans. But they do sell phones and if the repair job costs more than a new phone, Radio Shack will likely sell more of them.
“You have to figure that some Radio Shack sales people already possess the know-how to repair electronics. I am not sure that could be said for other mass retailers,” Long said.
Simon also set the record straight about selling household appliances within a supercenter setting. He said Wal-Mart piloted selling appliances in a number of markets, including Texas, in recent years. He said sales were good in certain locations but the process of selling appliances is not scalable.
“Our business model requires frequency in turns for items to be productive and effective and while white goods (appliances) sales where effective in a few locations, we have decided to evaluate now how we might sell these items online and deliver to store,” Simon said.