Circuit City Blames “Wal-Mart” Effect for Business Woes

  • Comments: 3
  • Written on: May 4th, 2007

I came across a business story a couple days ago on MSN.com that claimed that Circuit City, Sears, and Best Buy’s flat panel television profits are all being destroyed by Wal-Mart.

The story states that beginning during the last holiday season, Wal-Mart dramatically cut the prices of it flat panel televisions (some as much as 50%), which forced other retail giants to follow suit if they wanted the holiday flat panel business.

But that is where the MSN story stopped making sense and became a bash Wal-Mart tirade that pinned every electronics profit woe directly on the retail giant’s big blue star.

The story states that despite the fact that Wal-Mart is the second largest seller of electronics (behind Best Buy) in the US, the Arkansas-based company is only a “bit player” in the flat panel television market. The story points out that when Wal-Mart dropped its price on its Panasonic televisions, they sold out almost instantly.

If I am piecing this together correctly, Wal-Mart drops the price on a name brand flat panel TV for the holidays and immediately sells out. Therefore, all of the other retailers must also drop their prices to compete? Seriously, if you were planning on buying a flat panel TV for Christmas, and Wal-Mart was out, you would go somewhere else, right?

I don’t see how you can pin the shrinking profit margins on a product to the fact that Wally World sold a few thousand TVs around the nation at a roll-back price. There is a natural product life-cycle at work here, that has little to do with Wal-Mart.

Aside from what appears to be an obvious contradiction in the text of the story, I thought it was comical that retailers like Sears, Best Buy, and Circuit City were COMPLAINING about a larger retailer infringing on their turf.

The funny thing is that you didn’t hear locally owned Shaffer’s TV and Appliance store in Lincoln, NE squawk when Best Buy parachuted a box store one block from their location (or even when a Circuit City was installed 10 blocks from them as well).

Shaffer’s simply adjusted their business model to deal with the new environment and has now successfully competed there for years. In fact, that is where I bought my 42″ Panasonic big screen because they had a better selection than Best Buy!

I think it is time for the big-box retailers to take a dose of the medicine they have been handing out for years. Just like the rest of the “small guys” but there, Circuit City, Sears, and Best Buy are going to have to find a way to compete – or be assimilated.

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