Wal-Mart boots up to a whole new level of play - Computer Product Retailing

Discount Store News, June 19, 1995 by Pete Hisey

Wal-Mart continues to progress, in fits and starts, in its bid to become the nation's leading retailer of computer products. Its department now consists of 20 ft. of software, plus two promotional fixtures, stocking about 200 "A" titles (194 at our last count) along with another 30 ft. of hardware, accessories and peripherals.

But that will change over the Fourth of July weekend when the world's largest retailer rolls out a new planogram that one vendor said "will take them to a whole new level--a mini-Best Buy with terrific merchandising and improved service."

On the hardware end, the company now makes financing available (in Tampa, Norwest Financial is the third-party source), which will make the all-multimedia selection from IBM, Packard Bell, Compaq and Apple more accessible to its customer base.

According to Allen Blum, vp of GT Software, which is Wal-Mart's exclusive source for software, the game selection is due for a major increase. "Stores stocking 12 ft. will go to 20, and those stocking 20 ft. will move to 36 ft.," he said. "Sales more than doubled in the past year, and we'll do better than that this year."

Apart from sheer numbers, Wal-Mart has taken a quantum leap in quality as well. Six months ago, budget software and low-priced, fairly generic kids titles played a major role in the company's software selection. Today, however, the department is dominated by Microsoft Home titles, hit games like LucasArts' Dark Forces and Interplay's Descent, and quality kids' software from Broderbund, Microsoft and Living Books.

According to Blum, the real growth over the next year is most likely to come in the kids' area, where sales have been booming. "That's what the Wal-Mart customer wants," Blum said.

Wal-Mart has also clearly shifted to CD-ROM titles, which now make up about 80% of its mix--and climbing. And if a customer doesn't have a CD drive yet, the chain stocks several upgrade kits from Reveal, SoundBlaster and Sun Moon Star.

To make room for more games and kids' titles, business and utility software has been cut back dramatically, with the selection now down to a few versions of Quicken, a few Windows titles and IBM's Warp.

A measure of the esteem in which Wal-Mart holds computing is the quality of the real estate it devotes to the category. Fixtures holding discontinued titles (all of them floppy and few recognizable hits) are located at the entrance of the consumer electronics corral, and all fullprice titles are displayed face out, with only a handful displayed spine out. While Target has lately moved to all face-out merchandising, most mass merchants still display spine-out to maximize shelf space.

But the chain has tipped off its eventual direction in packaging, clearly segregating titles by package size. While Wal-Mart stocks many standard-size boxes, smaller packs from Microsoft, Softkey, American Laser Games and several other vendors are clearly getting more shelf space and have increased facings (and title depth) by about 25%, no small consideration given Wal-Mart's limited shelf space.

Any discussion of Wal-Mart's software business comes down to GT Interactive, the subsidiary of GoodTimes, the video distributor and publisher. To the chagrin of many competing publishers, GT has leveraged its Wal-Mart connection into a heavyweight publishing presence. At the recent [E.sup.3] expo, the company announced that it had signed a multi-title deal with Mercer Mayer, the creator of the million-selling Just Grandma and Me, in essence stealing the prolific kids' author from his longtime home at Living Books.

The first GT/Mayer title, Just Me and My Dad, will ship in December, Blum said, and will feature up to 26 "hot" items per page, about double the number in most Mayer titles.

GT also teamed up with Williams Entertain-ment, the arcade superpower, and gained exclusive CD-ROM rights to the upcoming Mortal Kombat III, as well as the hit SuperKarts, which is already on Wal-Mart shelves.

As a measure of what GT can offer a young developer, the company has signed a distribution agreement with up-and-coming Zombie Interactive, and has landed endcaps this fall at Wal-Mart and Target for Zombie's newest title, Ice and Fire.

Given Target's recent announcement to its vendors that it plans to capture 7% of the U.S. software market over the next two years, WalMart's eventual role in the industry, with more than double the number of stores Target runs, could conservatively top 15% and perhaps approach 20% as increasingly more middle Americans purchase multimedia computers.

Assuming Kmart rebounds from its malaise and gets more aggressive in computer products, the Big Three could easily command 30% of the market within a few years, with Wal-Mart leading the way.

That, of course, would open up even more opportunities as consumers begin to look to mass merchants as a primary source of supply for computer products, or at least computer products that fit into a shopping cart.

The real winner could be computer peripherals.

Almost from the onset of its entry into the computer business in the late 1980s, Wal-Mart supported the department with a relatively deep selection of peripheral products. And that assortment keeps growing.