Walmart's strategy in TV's: Price slashing and up-selling warranties

A recent article by BusinessWeek did a great job highlighting what so many unhappy flat-panel TV sellers have experienced, a downturn in sales and margins as a result of Walmart’s price slashing. Walmart is clearly doing what they do best; taking competitive verticals with high margins and discounting the items, in effect, beating out competitors through pricing and scale.

SquareTrade thoughts on Winners and losers.

It seems there are 2 clear winners with this approach. The consumer (lucky me, I’m looking forward to an affordable HD flat screen TV), and those who have the luxury of scale, in this case it’s Walmart. The losers? Everyone else.

The winning formula - Up-selling value add-ons like SquareTrade warranties.

A crucial part of this winning formula will be Walmart’s ability to up-sell to their flat-panel TV buyers both tangible and non-tangible things. Some tangible items that are easy for Walmart to up-sell probably include TV stands, DVD movies, expensive sound equipment, and perhaps new living room furniture to match the new TV. Non-tangible up-sells like extended warranty plans (similar to our own SquareTrade warranty plans) with in home servicing will be equally, if not more important.

What will happen to the competition?

It’s hard for us to imagine the likes of the downsizing Circuit city, or other specialty electronics stores competing with this model simply because they don’t have the type of scale that Walmart has, nor the tremendous focus on up-selling warranties or the diversity in merchandise to up-sell.

A bleak future for flat-panel TV’s on eBay.

We feel that the affect may be even harder on eBay flat-panel TV sellers, where buyers traditionally go to find better prices on flat-panel TV’s. Already an item that is both delicate and costly to store and ship for eBay sellers, cutting prices further will only take away from the thin margins, leaving sellers with very little in return on their investment. This time, Walmart’s low price commitment to their customers seems unbeatable. Just imagine. Black Friday prices across more types of flat-panel TV’s, every single day. It will be interesting to see which market Walmart taps into next.