CE gaining increased notice at discounters - Consumer Electronics - Discount Industry Annual Report. Part II: Merchandising and Productivity Analysis

Discount Store News, August 5, 1991

CE Gaining Increased Notice at Discounters

Consumer electronics is rapidly becoming more and more important to full-line discounters. From Kmart installing a Sharp high-tech 100-inch projection television in at least one of its new stores to Wal-Mart testing 150 Home Office departments to Fishers Big Wheel re-accentuating the category, CE is becoming big business.

Of course, the category has been up and down for years, but there's a twist this time. In place of the more commonplace array of off-brand boom-boxes, inexpensive color televisions and cheap telephones, discounters today are making their money in relatively sophisticated areas, including pcs, video software, fax machines, personal printers, compact disc players and full-feature telephones to build traffic, consumer loyalty and, of course, sales.

Now, retailers are targeting profitable software and accessory product areas, including a wide range of office accessories like printer ribbons, computer peripherals, diskettes, software, toners and other daily-use items that draw consumers into the store on a regular basis, and offer attractive margins as well.

Storage products, blank media like videotape and audio tape, video game accessories, and video cases and accessories are also growth areas.

Like CE specialists, discounters were hampered by the recession and the lack of any truly new products in the marketplace. But they seem to have used this period of inactivity to upgrade their selections and move into technologies that were thought to be too advanced for their customer base. While Wal-Mart has experimented with computers, fax machines, copiers, large screen televisions and other products over the past decade, the chain is just this year really making an effort to become a home office source. Wal-Mart is reportedly rolling out 150 home office departments across the country that will sell a full range of business products, from hardware to supplies to accessories.

Kmart has dressed up its CE department, rolling out a selection of 8mm camcorders to all stores in late 1990, testing big screen televisions, making a major commitment to the video game category and committing to top national brands.

Target, too, has upgraded its selection and focused more on the category as a whole.

With expansion by superstore chains pretty much maxed out, discounters will have the opportunity in the coming years to build their CE business. The CE superstore attracts and caters to a certain segment of the market. While it is a large segment, there are a lot of consumers out there who don't patronize the superstores, yet still want relatively sophisticated products.

While it's rare that a discounter pioneers any product category, here are a few that are starting to mature that may lend themselves to the discount environment in a major way: big screen televisions, camcorders, hi-fi VCRs, CD changers, satellite systems, low-end fax machines, pcs and printers, personal copiers, 16-bit and CD-ROM video game systems, and personal reference devices like Franklin's spelling aids and Sharp's Wizard organizer.

The most interesting aspect of these products, or at least most of them, is that they promote repeat visits for higher-margin supplies like computer diskettes, printer ribbons, 8mm and VHS tape, fax paper, computer and video software, video editing systems and much more. And coming soon are technologies that should rapidly move onto discount shelves after a brief period at specialists. They include digital compact cassette, Sony's Mini-Disc and even HDTV. All of these are relatively simple and straightforward products that can virtually sell themselves, which make them ideal for discounters.

The discount industry as a whole has made enormous strides in offering consumers an easy-to-shop environment for consumer electronics. Most major discounters, including Ames, Kmart, Wal-Mart and Target, now have manned departments, and generally better-trained employees work there. With the new wide aisles, upgraded merchandise and at least a modicum of service, discounters are no longer obviously poor cousins of the CE chains.

And as formerly high-tech products like computers and copiers enter the mainstream of the American marketplace, discounters will play an increasingly important role in bringing them to market.