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Let the battle for holiday gadget shoppers begin

Retailers try different strategies for competing with behemoths like Amazon and Wal-Mart in the cutthroat competition to lure those giving electronics as gifts.

Erica Ogg Former Staff writer, CNET News
Erica Ogg is a CNET News reporter who covers Apple, HP, Dell, and other PC makers, as well as the consumer electronics industry. She's also one of the hosts of CNET News' Daily Podcast. In her non-work life, she's a history geek, a loyal Dodgers fan, and a mac-and-cheese connoisseur.
Erica Ogg
5 min read

For the past few years, holiday cheer has been in short supply for electronics retail chains.

Just two years ago, around this same time, we saw the bankruptcy and closure of CompUSA. Last year it was Circuit City spiraling toward extinction right before the crucial holiday shopping period.

Though both brands have been since revived, mainly as online discount destinations, their time as serious competitors with physical stores is over. Looking back, it's clear their demise was brought about by a languishing consumer economy, but also by the unrelenting competition from uber-discounters like Wal-Mart and the convenience of Amazon.com.

Wal-Mart competition
Will the discount retailer drive other competitors out of business this holiday? Wal-Mart

Wal-Mart, a giant among brick-and-mortar and online retailers, has been able to repeatedly deal crushing blows to rivals with its hard-to-beat pricing, particularly at what's seen as a crucial time of year for retailers, between Thanksgiving and Christmas. Though the overall economy is in nowhere near the terrible shape it was a year ago, will Wal-Mart be able to drive even more brick-and-mortar electronics retailers into the ground?

The traditional start of the holiday shopping season is the day after Thanksgiving, known as "Black Friday," when retailers attempt to get into the black on their yearly balance sheets. With fewer brick and mortar retailers that deal solely in electronics this year, Wal-Mart has already begun another sustained attack on pricing this holiday.

Though Walmart.com has about half the number of unique visitors to its site than Amazon during any given month, according to Compete.com, the company hopes its name will continue to attract people pinching pennies while looking for gifts this year.

"Everyone expected that consumers would be going to Wal-Mart in stores or Walmart.com because people migrate to value when the economy gets difficult," Raul Vasquez, CEO of Walmart.com, says. "We've had a higher percentage of people buy products than even a year ago. We do feel very good about the holiday."

With an average of 10 million to 15 million visitors per week to its site during the holiday shopping period, and 10 million on Thanksgiving Day alone, according to internal counts, Walmart.com is taking advantage early. The online destination for the world's largest retailer is specifically ratcheting up the pressure on its electronics competitors, even weeks before Black Friday. For the last few weeks, for example, it's begun offering 97-cent shipping fees on all gadgets except iPods, as well as discounted bundles of what are expected to be the most popular gift items this year: things like the Nintendo Wii--anticipated to be one of the top sellers by retail trend analyst site Retrevo--plus games and two controllers, digital cameras and cases, as well as Netbooks and USB drives.

But Wal-Mart's chief competitors are following suit. Best Buy, Wal-Mart's only real remaining national brick-and-mortar rival in consumer electronics, did better than Circuit City, but still barely survived the bleak holiday period a year ago. Amidst what former CEO Brad Anderson called "the most challenging consumer environment our company has ever faced," Best Buy saw its earnings drop 77 percent and was forced to offer thousands of buyouts.

Though things are looking slightly better this time around, Best Buy is having to slash prices early, too. Starting two Sundays ago, the retailer began offering some deeply discounted flat-screen TV prices. And beginning the day after Thanksgiving, the regular Black Friday bonanza should proceed as usual. Though Black Friday sales can be counted on to pad the quarterly profits, just how much will be an important indicator of the health of brick-and-mortar electronics retail.

Early starts
To take full advantage of consumers' seeming powerlessness to resist great deals, most retailers have looked beyond Black Friday--the day itself--to get people in the door or poking around on their Web sites.

"Black Friday is one of our top sales days," said Walmart.com's Vasquez. "Thanksgiving is a big day, the day after, and then usually one of the Mondays in December...It's a bit of a cage match between those."

Amazon.com, in great financial shape going into this holiday, also looks at the entire month-long period as a potential for big sales.

"The whole week (of Thanksgiving), starting Monday is a really big week," said Amazon spokesman Craig Berman. That's when Amazon started rolling out its most attractive holiday pricing on electronics. Every day this week there will be timed sales, with new items discounted between 10 percent and 60 percent. From hard drives, watches, digital picture frames to notebook PCs, limited numbers of items will be discounted for four-hour periods, or until the stock is gone.

Best Buy mobile app
Screenshot by David Martin/CNET

The Monday after Thanksgiving, often called "Cyber Monday," is traditionally a day when e-tailers chop prices and make a big holiday discount push, but Amazon has found it also does well even as Christmas approaches. Thanks to procrastinating gift givers, even on days without a focus on lowered prices, Amazon fares well. "Historically, our busiest days happens in mid-December, close to one week out from the free SuperSaver Shipping deadline," said Berman.

Smartphone shopping
Ultimately, they're all angling for even the slightest edge to get consumers online or in stores, no matter what day it is. One of the ways they're doing that is by embracing a new trend popular with many consumers. This year, almost all major electronics retailers have a mobile applications that enables shopping or doing price comparisons directly from a smartphone.

Amazon has apps for both the iPhone and BlackBerry that are mini versions of the site, allowing shopping, price comparison, order tracking, and more. Best Buy, Target, eBay, and others (see here for a full list) have gotten on the iPhone app bandwagon too with similar mobile sites, though it's not yet clear if they're boosting business. Wal-Mart has an iPhone app too, specifically for gadget shoppers. It lets users take a photo of a wall at home, input how far away the couch is, and the app will recommend what size TV to buy and the manufacturers that sell it.

Walmart.com says it is already seeing results. Without divulging specific numbers, TV sales growth this year has been "in the very high double digits," according to Vasquez. "It's outpacing our site growth."