Wal-Mart tries to close gadget gap with Best Buy

A revamped electronics section is coming to your local Wal-Mart, including more connected TVs and Blu-ray players that stream its new Vudu video service.

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
4 min read
Wal-Mart gadgets
A sample of the new displays coming to Wal-Mart. Wal-Mart

Sometime early next week when you walk into the electronics section of your local Wal-Mart, you're likely to notice some changes.

More big name brands of TVs, Blu-ray players, smartphones, and other gadgets will begin to populate the store shelves as the retailing giant tries to expand its reach and customer base even further. The new products will include the latest in TV technology, meaning displays with LED backlighting and Internet connections, Web-connected Blu-ray players, and home networking equipment. There's also going to be more emphasis on getting the trendiest smartphones from carriers on the first day they're available elsewhere, and more accessible mobile broadband plans.

Wal-Mart isn't an underdog in many categories, but in electronics, it's far from being the category leader. Best Buy, whose revenues in 2009 totaled $45 billion, is the largest seller of consumer electronics. Wal-Mart beefing up its gadget offerings is likely part of an effort to play a little catch-up with Best Buy. In 2009, Wal-Mart's electronics sales were $33 billion, or 13 percent of its $258 billion overall revenue.

Wal-Mart, of course, has plenty of things going for it that Best Buy doesn't. Its reach is extensive, and when the recession hit, Wal-Mart was able to take advantage of many people's freshly discovered frugality. Another thing that happened is technology has become essential to a lot of daily activities. As things like computers and TVs become must-haves for all demographics and not just the geeky early-adopter set, Wal-Mart is well-positioned to make even more sales of gadgets.

"As people start to view TVs or phones or computers more as commodities like milk and eggs--they need a phone, they need a computer like they need a gallon of milk--and if people have done the research and know what they're looking for, they tend to go to the place they're already going," said Stephen Baker, retail electronics analyst with The NPD Group. For many people, the place they are already going is Wal-Mart, where they get their groceries, clothing, and kitchenwares.

The other necessary move the retailer had to make to keep up with Best Buy came in February, when Wal-Mart purchased the broadband home video service Vudu. That followed Best Buy's tie-up with Roxio's CinemaNow video service last year. In both cases, the video service is planned to be available on every connected device each respective retailer sells.

Part of Wal-Mart's revamped electronics section next week will include the official rollout of the Vudu service in stores.

"We made the Vudu acquisition earlier this year because customers look to us for entertainment," Greg Hall, vice president of Wal-Mart media and services. "We see that transitioning to a digital play over the next year."

The idea is that people are going to be streaming video one way or another on their laptop or through Boxee on their TV, so why not be the destination and provide the service? It's a problem for both Wal-Mart and Best Buy. Neither wants to lose those kind of sales.

"They're concerned because the way you got people in the store (previously) had been music and movies," said Baker. "As those things turn more virtual they need ways to get people to get back into that store and associate their brand with purchasing of movies and music."

Bringing in the big names
The Internet-connected TV and Blu-ray player brands available at Wal-Mart will include Vizio, Samsung, Sony, and for the first time, LG. Later this year, Sanyo and Emerson, Wal-Mart staple brands, will also be added to the lineup of TVs where Web widgets come standard.

Wal-Mart says its offerings in smartphones will include the latest from HTC, Motorola, and Apple too. There will also be a wider selection of mobile broadband plans, including prepaid and pay-as-you-go wireless service for laptops, though Wal-Mart didn't say which carriers would provide the service.

Good deals at Wal-Mart don't constitute breaking news--they're a discounter after all. But having the major name brands associated with Wal-Mart should definitely pull in some people who wouldn't necessarily think to shop there for the latest in TV or home theater technology. And it could also appeal to someone who has done research on their own, already figured out what they want, and have no interest in being given the hard sell by a blue-shirted salesperson.

But will any of this mean Wal-Mart can close the gap between itself and Best Buy in the minds of customers and in the financial books soon? Probably not for now.

"I don't think that's possible in the near term. I think Best Buy is pretty solidly No. 1," said Baker. "This isn't a Toys R Us thing where Wal-Mart is taking over the category."

The other problem--which could change with bigger name brands--is being able to sell higher-priced items.

"They're still challenged in terms of bringing in premium early-adopter kind of products in there," he added. "That's an essential piece in becoming an electronics destination."