Summary
In their recent earnings report, WalMart said "The chain also attracted more customers, helped by price reductions on its Sam's Choice Black Angus beef patties, baked beans and flat-panel televisions to lucre customers." Beef patties, baked beans and flat-panel TVs?? Never before have these three items come together to deliver favorable earnings results -- is this part of the "new normal", and if so, how does Best Buy compete with that?
Analysis
Over the past six months, WalMart has done an impressive job ratcheting up their credibility and position in the consumer electronics category. With an expanded selection of notebook & netbooks computers and a dramatically improved assortment of tier-one branded flat panel TVs, the worlds largest retailer is rapidly making mind share and market share gains in consumer electronics. In addition to the merchandise upgrades, WalMart has strategically located consumer electronics next to the high traffic/high frequency household and food categories, positioning the category in a very accessible and approachable spot with females – a critical audience now responsible for more than 80% of household spending decisions. While Best Buy has done a terrific job with segmentation and making their stores more comfortable for a variety of shopper types, one has to wonder where Best Buy's leverage is for increasing traffic in a down market, beyond price and promotional plays. All retailers are challenged to stimulate traffic in a down economy. But, making the current environment even more challenging for Best Buy are continuous and extended declines in the high frequency/ high traffic CE categories of pre-recorded CDs & DVDs, and now video games - a long-time bright spot considered by many as recession resistant, video games just experienced it’s fifth straight month of sales declines. It’s not that Best Buy has been sitting on their hands – Best Buy Mobile and the musical instrument category are smart, logical moves to increase reach and relevance among a broader base. But to compete against the kind of traffic beef patty and baked bean promotions generate?? That’s a tall order.
Cathy Stauffer consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
