Summary
How does the UK market differ from the US model?
Why is this a good move?
Will they succeed?
Analysis
WalMart's Asda unit announcement that they will compete in the online segment of the UK electrics market makes sense from a number of perspectives, not the least of which is filling a need. UK consumers are more cost conscious than ever and have the advantage of a plethora of electrics retailers to educate them. Armed with their brains and wallets then they move online to "close the deal."
Unlike in the US, Asda has been plagued by insufficient space in many UK stores and can’t afford to steal from its key fast moving categories like grocery and clothing to sell a wider variety of electrics. Taking a deeper online plunge can be supported by a strong logistics infrastructure, hopefully without disturbing store level profitability.
Catalog shopping retailers like Argos, who have a strong online business, have large share in some electrics categories. For many years, they dominated small kitchen electrics. Britons are comfortable with at-home shopping. Against 90+ household penetration of the Argos catalog, Asda will need to spend some money to get this business up and going in terms of building awareness, but there is room for additional players. Along with the catalogers, DSG International's Dixons online business has been growing at 50% a year since 2002 and gets over a million hits a month according to the BBC.
In the end, consumers have all the tools to find the best deals and will shop with their favorite retailer all else being equal. Asda is counting on using their loyal customer base to help become a leader in electrics as well. Measuring success should not take too long provided the launch plans have adequate marketing support. While initially targeted at the current Asda customer, clearly this project has potential to recruit new customers into Asda stores as they gain confidence with Asda’s service and raise their perception of this retailer from experience in higher tech, branded categories.
