How Wal-Mart’s TV Prices Crushed Rivals – BusinessWeek.com: The publication provides an explanation behind the closures of such stores as CompUSA and Circuit City.
Last “Black Friday”, Wal-Mart Stores decided to slash the price of one of the hottest electronics items for the holidays—the 42-inch flat-panel TV—to $988. This move caused a freefall in prices of flat-panel televisions at hundreds of retailers—to the glee of many people who were then able to afford their first big-screen plasma or liquid-crystal-display model.
Now, it is becoming apparent that Wal-Mart’s calculated decision to break the $1,000 barrier for flat-panel TVs triggered a disastrous financial meltdown among some consumer-electronics retailers over the past four months
The fallout is evident: After closing 70 stores in February, Circuit City Stores (CC) on Mar. 28 laid off 3,400 employees and put its 800 Canadian stores on the block. Tweeter Home Entertainment Group (TWTR), the high-end home entertainment store, is shuttering 49 of its 153 stores and dismissed 650 workers. Dallas-based CompUSA is closing 126 of its 229 stores.
If what the article says is true, then we have a very interesting situation developing in the Blu-ray and HD-DVD war, with Wal-Mart having plans to deliver cheap HD-DVD players (US$300). This could be the sign of bad times for Blu-ray.
“This could be the sign of bad times for Blu-ray.”
I agree. I thought Blu-Ray had won this war for sure, but this massive price drop will certainly help tip the balance for a bit. Price was one of the main advantages of VHS over Beta. Maybe we’re witnessing history repeat itself.
everyone loves to hate the big guy. But if they didnt do something right they would not be the biggest. I also have no sympathy for best buy or comusa they have poor management and a screw the customer attitude ( I am a best buy card holder who was dumb enough to buy a tv on it and didnt read the fine print . they try to make you pay late they add insurance to your acct with out your approval, I am glad that I have paid that card off and I will never do business with them again
It’s too bad that Circuit City had all it’s eggs in the flat panel TV basket.
Their Canadian counterpart “The Source” is extremely overpriced, even compared to their US based Circuit City stores.
Also CompUSA closing their stores will have disasterous effects on Apples Computer division. They were the second largest distributor of Apple computers after Apple stores. Now that there is no Apple retailer in towns like Ann Arbor, it is going to be a disaster in terms of Market share for Apple computers.
Why Tweeter should be mentioned along with mass-market retailers is a mystery. There’s virtually no market overlap between Wal-Mart and Tweeter.
Tweeter’s problems are unrelated to price wars on low-end consumer electronics; their market segment, mid- to high-end + custom installs, has been gradually dying for a decade or more.
Confounding these two different situations is crappy reporting… who knows what else BW’s reporter got wrong?
I keep telling people Walmart is evil, but nobody seems to be passing the word.
I needed a case fan for somebody’s computer a few weeks ago, and went to CompUSA on the search. What a surprise to find they were going out of business, but they should not have entered the TV market in the first place.
From an inside upper-management source, I know Best Buy only continues to sell computers “because it has to”.
The big box retailer that sells everything is a bad idea. This business model puts competitors out of business (which is bad for capitalism), and limits choice. Have you seen the cheap crap Walmart pushes? The vast majority of their products come from China. CHINA, sheeple, CHINA!!!!!
I remember when department stores like JCPenneys, Sears, and Daytons sold toys. Then, along came dedicated toy stores like Toys’R’Us and the late Children’s Palace. The department stores stopped selling toys, but I have to wonder how much that hurt their core business of clothing and accessories, or tools and equipment in the case of Sears.
The only hope for reprieve is consumer backlash against the Wall family, or another business (possible worse) kicking them off their perch.
Until then, you would be wise to start studying Cantonese and Mandarin.
More info at: http://www.walmartmovie.com
Just WHAT was CrapUSA doing selling TV’s ANYWAY? They lost sight of their core market…they had the computer stuff to themselves for so long, they didn’t react appropriately when Best Buy, Circuit City, etc. started selling computer stuff, too. What they should have done was advertised themselves as the experts, beaten the others on price (instead of getting beaten on price consistently) and become known as THE place to go for computer stuff (instead of being known as the place of last resort for computer stuff).
Instead, they tried to take on the others in the consumer electronics field…and those others are the experts there. Bad move.
#4, Greg, Apple is UP 11% since the CompUSA store closing news, Feb 28. I just bought 4 more Macs and upgraded to Tiger. Tiger is a jaw dropping masterpiece of an interface that puts Vista to shame. It takes under 10 min to install and runs flawlessly. I can’t, for the life of me, understand why anyone would suffer through any Microsoft product, including Word (what a piece of crap). Almost every feature of Vista is a poor copy of Tiger’s genius… and that is a fact.
Osmodious,
Don worry, Circut city is gonna beat themselves. With the whole thing where they fire the top 10% of their workforce… I am speechless. I don’t know what to say to that…
#8
That is based on speculative stock prices and the Apple Phone, and little else. I am not saying that it is a bad speculation, only that it is speculative.
For example, in Ann Arbor (a demographic of Apples core market) I am starting to see people with headphones pluged into their cell phones, instead of their ipod. That means that Apples ipod business until is reaching the end of its lifetime. Either the Apple phone is the biggest hit of all time, or Apple as a company will start to significantly diminish over the next year as iPods are replaced with mp3 playing phones.
Sorry bud, that is just the consumer electronics business. The play field changes every year.
Also, eyecandy is just that. OSX is still relying on that double buffer, but the users want low latency in their interface, which Vista soundly beats OSX on.
Oh also, Window Movie Maker soundly beats iMovie in usability.
To chunk one more thing on to my #6 post —
If and when Wal*marts start closing, say goodbye to all the small towns that brought in the box, and shut down their business district / downtown / commercial area / whatever….
Yeehaw the cowboy rides again… 40 minutes, 15 seconds, what’s the difference?
WalMart vs. Sony – kind of like Godzilla vs. Gamera, who to root for? All we know is that the little stores (like Tokyo) are going to get squashed.
“It’s Econ 101: Best Buy and Circuit City had seen fat margins from flat-panel TVs for a while, and as it happens with any product, eventually the margins come down and the music stops,”
Fat margins? Too bad.
I will buy a flat panel TV from Wal*mart as soon as they carry something worth buying.
CompUSA made a huge mistake trying to be Best Buy. They stopped being a computer store long ago. All we have left within 50 miles of my location is a single MicroCenter store. I want the old CompUSA back….the computer store.
#4 – Also CompUSA closing their stores will have disasterous effects on Apples Computer division. They were the second largest distributor of Apple computers after Apple stores. Now that there is no Apple retailer in towns like Ann Arbor, it is going to be a disaster in terms of Market share for Apple computers.
Comment by GregA — 4/24/2007 @ 6:13 am
I sort of doubt that it will have all that great of an impact on Apple, frankly. Their direct sell model is fairly effective, and the iPod is available everywhere. And I do mean everywhere. Hell, I think I might even sell iPods and I don’t even work in a store.
((And computers is really just a sideline anyway since the iPod)) 🙂
The fact is, CompUSA has been dying a long slow death since the late 90s and its a mystery how they managed to keep afloat as long as they did.
And it isn’t because their customer service philosophy make’s Best Buy’s look positively Utopian. We all know that customer service is not nearly as critical as people claim. I constantly hear “I’ll never shop there again” but at the end of the day, price drives the market.
CompUSA (which will die soon) isn’t closing all of its stores… Just about 100 of them or so. They failed to tell their story and convince consumers that they can offer something that other big boxes can’t (they can’t, but marketing isn’t about truth). Then in desperation, they bought and squandered Good Guy’s Electronics in an ill advised attempt to expand to home theater.
TV didn’t kill CompUSA. Wal-Mart didn’t do it either. CompUSA’s death will be ruled a suicide.
#15 – Dude… I’d LOVE to have a MicroCenter near me.
If Best Buy or Circuit City depend upon their TVs to survive, they have a pretty crappy business plan.
There is a Micro Center here in Kansas City but I would rather have a Fry’s Electronics instead.
# 6 I urge you and everyone else that thinks Wal-Mart is evil to watch Penn & Teller’s BullSh!t on the issue of Wal-Mart.
Did you know that Wal-Mart saves the average American family over $2,000 per year?
#11 And just who may I ask is going to close down Wal-Marts? They are building new ones at a steady clip.
Many Downtown areas weren’t killed by Wal-Mart they were killed by Malls. El Dorado Arkansas (where I live) is a perfect example. We had a Wal-Mart but it was one of the smaller ones. Then they built a Super Wal-Mart and that killed the mall. The downtown area has over the last 10 years been completely remodeled with specialty stores and restaurants.
#4 – Best Buy announced they will be building Apple Stores inside some of their locations. If Best Buy goes away, then you will have a Apple Store in Wall-Mart’s then we can all afford the best OS. 🙂
Circuit City is no loss to anyone. A week ago they tried to sell me a $12 computer case fan for $29. On top of that, inside the package they tried to hide the fact there were no power connectors of any description, just bare wires that needed to be soldered to something.
It’s not like I haven’t purchased literally hundreds of case fans for $12 – with a choice of power connectors already attached.
So Walmart’s evil for shutting down the little guy: Circuit City?
You guys favor higher prices for TVs?
I will not shop at Wal-Mart; I don’t give the first flying fuck how low their prices are, I’m not gonna save a fucking dollar and support wage slavery that simply adds unneeded additional dollars to the $15 billion each that Sam’s heirs already have. Fuck them, the horses they rode in on, AND the planes they had the horses flown in on…
And with Circuit City’s latest greedhead scumbaggery, you can bet Larry Ellison’s yacht to a microwaved snowball that I ain’t going in their store at gunpoint.
#11 – GregA
“That is based on speculative stock prices and the Apple Phone, and little else.”
Do you get your business info from Spongebob, or what?
The iPod is their currently dominant profit center, sure, but Mac sales are rising 30% every quarter, setting records repeatedly. That’s not merely an upward trend, but an accelerating one. In other words, the reality is the exact opposite of what you suggest.
“Also, eyecandy is just that.”
So that’s why millions of users’ll have to buy new vidcards if they want MS’s blatant imitation of Aqua? What’s your point?
“OSX is still relying on that double buffer, but the users want low latency in their interface, which Vista soundly beats OSX on.”
Oh, how true. Every time I turn around, Vista
suckersusers are grinning ear-to-ear and joyously proclaiming, “Boy, I sure am glad I got me that there low latency interface!” Yeah, that’s a major priority for everyone – that is, especially since I’ve never in my life heard anyone say such a ludicrous thing, me being a computing newbie with barely 28 years experience to draw on and all… I guess no one else ever mentions it either, since it’s a given, right?Crikey,™but that has to be the dimmest thing I’ve heard today.
Sadly, it appears that an increasing number of foolish users have higher priorities than ‘interface latency’, silly, irrelevant crap like freedom from virii, malware and crashes, and plug-and-play that actually works as advertised, just to name a couple.
“Oh also, Window Movie Maker soundly beats iMovie in usability.”
Really? Coulda fooled me.
The only people I could find who think that are rabid MS fanboiz…
#19 – I’d trade you but then I’d have to live in Kansas City… and Indianapolis is about as far down the ladder of size and population* as I’m willing to travel.
*(not saying anything’s wrong with where you live… just that it isn’t right for my lifestyle)***
***(I can’t believe I feel the need to put these disclaimers on things)
#20 – Penn and Teller’s show is great… But it features as much Bullshit as it exposes. All it is, is Penn Gilette’s side of the coin, and that I usually agree with him isn’t a reason not to recognize that.
Wal-Mart isn’t evil per se… and any rational person knows that. But they also can see that they have more than their fair share of ethical challenges.
Not that Wal-Mart is really that important here. They may have triggered a price drop in the low end… but they don’t affect the market with high quality demands. They simply are not a serious player in the high end home theater market… and hopefully never will be as they are completely incapable of competently filling those shoes.
OFTLO –
“They simply are not a serious player in the high end home theater market… ”
A serious player?? They’re not a player at all, my boy. The High End has a very specific meaning, it doesn’t mean “more expensive than average”, it doesn’t mean $4000 TVs, it means $40,000 TVs, not $1000 DVD players, but $15,000 ones. The best stuff sold at MMRs like Wal-Mart and Circuit City is mid-range in the greater scheme of things. While certainly not everything High-End has a nosebleed price, it’s still nothing that Joe Twelvepack will ever have any interest in.
I suppose that’s one reason why the High End is dying; no one even knows what it means anymore… 🙁
26, Comment by Lauren the Ghoti — 4/24/2007 @ 11:18 am
As Ed McMahon said to Johnny Carson, “You are correct, sir” When you’ve got more invested in cabling than most have paid for a their “new” TV, you may talk about high-end.
#26 – Yeah… I know.
#27 – When you have that much invested in cabling, you might also be able to talk about OCD.
#28, OFTLO, nah, just really great video and sound. Hey, it’s a hobby. I don’t like paying $20 to go to the movies, there isn’t a theater nearby that can compete. Guess I could drive 40 miles to one of those DLP screens, but I don’t like putting up with screaming kids, sticky floors and rude adults.
Re High end audio and video… you are a dying breed.
Interesting article today in Salon.com
http://www.salon.com/ent/audiofile/?last_story=/ent/audiofile/2007/04/24/stereo/