Wal-Mart Seeks Share of Electronics Market

At the Wal-Mart Supercenter at Pleasant Crossing in Rogers, associates and managers are giving the electronics department a makeover. They’re reorganizing aisles, unveiling more interactive displays and adding bigger, brighter signage.

There are more 52-inch high definition televisions on display. The video gaming section has been reorganized. Laptops have been removed from their locked cases and put on display where customers can touch and experience the various units.  

The changes are occurring at stores across the country as Wal-Mart Stores Inc. steps up its game in the electronics arena.

The company announced in May a plan to add more products and features to the entertainment departments in its 3,500 stores.

The Bentonville retailer is increasing its selection of wireless products by 30 percent and focusing on cellular and smart phone products such as the BlackBerry Bold and Palm Pre.

It’s adding more Blu-ray players and movies, including a $198 Philips Blu-ray Disc Player.

There is an expanded selection of televisions with more 1080p and 120Hz sets.

“We’ve made a number of significant changes in the last three years to raise the bar in our offerings and gain consumer confidence and trust as an electronics destination and we have every intention of keeping that pace with continued improvements in service and assortment,” Gary Severson, senior vice president of home entertainment, said in a statement.

The recent improvements come just in time to capture some of the market share left by Circuit City, which closed its stores nationwide in March.

“Circuit City’s business is up for grabs right now and we expect to get our share,” Severson said in a recent interview with the Wall Street Journal.

But Wal-Mart executives say the electronics push is just a part of the overall campaign to gain market share across all income levels.  

In addition to benefiting from the consumer thriftiness that has developed out of the economic downturn, Wal-Mart is changing the look of its stores and bringing in more merchandise to attract and retain customers.

 “Across the company, we will continue to build our brand, reduce costs, sharpen our merchandising and remodel our stores and clubs,” Mike Duke, president and chief executive officer, said in a pre-recorded conference call in April.

Flat Financials
Wal-Mart may be banking on electronics to boost profits, but the company reported flat earnings for the first quarter of fiscal year 2010, which ended April 30.

The company reported a profit of $3.02 billion, or 77 cents a share, compared with $3.02 billion, or 76 cents a share, for the same period a year ago.

Net sales were $93.47 billion, a decrease of 0.6 percent from the $94.04 billion in the first quarter last year.

Wal-Mart said the earnings would have been 4 cents per share higher but were impacted by the currency exchange rate.  

Still, executives said they were pleased with the first quarter results.

“These results were achieved in the face of a very challenging global economy,” Duke said in the conference call.

For the three months ended May 1, sales at Wal-Mart stores open at least a year increased 3.7 percent. U.S. same-store sales in April rose 5.9 percent.

Eduardo Castro-Wright, vice chairman of Wal-Mart’s U.S. operations, said customer traffic rose to levels not seen in several years.

“We find a large part of our growth is coming from new customers,” he said.

In February 17, percent of the measurable growth in traffic came from new customers.

“We are committed to retaining these new customers through our new assortments and the way they experience the brand in our stores,” Castro-Wright said.

According to the 2009 annual report, earnings per share from continuing operations were up 6 percent to $3.35. Total net sales increased by 7.2 percent to $401,244 million in 2009.

Comparable store sales, which indicate the performance of existing U.S. stores, increased 3.5 percent in fiscal 2009.

Electronics Expansion
Wal-Mart spokeswoman Melissa O’Brien said the recent changes in the entertainment departments are part of the company’s ongoing efforts to enhance that segment.

Wal-Mart’s electronics departments have been steadily expanding over the last few years as the gap narrows between specialty stores and discount retailers.

The company started stocking flat screen televisions in 2003 and followed with personal computers.

Departments in many new stores also doubled in size that year.

 “We’ve been out there as one of the leading retailers in electronics for three or four years now,” O’Brien said.

Brand loyalty is key in consumer electronics, she said, and the store has brought in many of the most coveted brands, including Sony, Dell, Apple and Samsung.

“Our offerings continue to get stronger as a competitor in this area,” she said. “We’ve worked really hard to make sure our assortment reflects what the consumers are looking for.”

O’Brien said televisions are something that consumers continue to purchase even in a tough economy.

“People want to have a nice entertainment experience at home,” she said. “So we’re continuing to add more brands and increase our assortment, and still at the best price.”

The company is also working to enhance the shopper experience by making the aisles easier to navigate.

Bart Smith, market electronics merchandiser for Wal-Mart’s Northwest Arkansas stores, said the goal is to make shopping easier and more fun for the customer.

The aisles are wider, he said, pointing out the absence of display islands that previously crowded the walkways, and the shelves are lower.

O’Brien said the company has recently focused on improving the look of the gaming section.

“One thing we’ve tried to do, especially this year, is simplify the shopping experience,” she said.

Games, consoles and accessories are grouped together by brand.

A mom shopping for a Wii accessory, for example, can find it easier with the improved design, O’Brien said.

“We’ve made the selection easier through color assortment,” she said.

Now that Wal-Mart is one of the top electronics destinations, the latest upgrades are aimed at staying there.

“We know customers really value our ability to bring them the brands they trust, the right level of assortment, and the most affordable prices,” Severson said. “We want to continue to keep them engaged and inspired, making selection easier and introducing more technologies that add comfort, fun and quality of life for themselves and their families.”