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Showing posts with label Consumer Electronics Recession. Show all posts
Showing posts with label Consumer Electronics Recession. Show all posts

Thursday 10 January 2013

Consumer Electronics Recession




Walmart Defies 


Consumer Electronics are experiencing an uncharacteristic moment in the dog house as shoppers eschew hardware and entertainment devices, opting instead for mobile practicality. This trend is hitting retailers hard as the most popular products are easily obtained direct from manufacturers, service providers or less expensive online outlets. There is of course an exception — Walmart, it seems, is defying the CE recession.

We’re hearing a lot about new technology this week. With International CES underway in Las Vegas there’s plenty to marvel at, but precious little to drive shoppers into stores. CES is hot, but CE sales are not. Best Buy, GameStop, hhgregg, are all suffering from CE sales doldrums this holiday season.

But discounter Walmart is bucking the trend. According to this research note from Janney Capital Markets David Strasser:

We had a chance to learn more about WMTs CE business at CES, and we are impressed with what WMT is doing and where the company is going in this critical category. Our conversations with manufactures lead us to believe that WMT had a solid or a better holiday season in CE. We believe this holiday will show WMT is gaining share and traction in CE.

It makes sense as trends are decidedly in the discounter’s favor. Products are fully commoditized as HDTVs, Blu-ray players, sound bars and computers are well into their technology life cycles. Shoppers are making decisions based on price and Walmart has long been the low-price leader.

Future trends could also benefit Walmart as pre-paid smartphone sales heat up and contract based plans get a boost from lower-priced handsets. Even Apple is rumored to be developing a lower-priced iPhone. “The next phase of smart-phone adoption/penetration will likely come from the low end consumer which is WMT’s sweet spot – allowing them to grow the wireless business dramatically over the next few years,” wrote Strasser.

Target too, stands to benefit from these trends in the next couple of years. Today, Target announced it was extending holiday price matching through the year, promising to match competitors advertised prices on products found both in stores and online. Its move that could help establish price parity between big box retailers and Amazon.com.

But Walmart is even better positioned than Target to gain share in consumer electronics. It’s willingness to accept compressed margins across categories make it particularly adept at navigating the razor thin margins in CE whereas Target has been less reluctant to sacrifice margin for sales and share.

None of this bodes well for the specialists and Best Buy’s future remains grim, fraught with problems both of its own making and those of the industry at large. The CE industry is cyclical and eventually new technology will reach the market at compelling price points to keep retailers in business. But for now, Walmart looks to be sitting pretty.





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