Best Buy vs. Wal-Mart: Is There Room for Both, and Others?
Published : April 01, 2009 in
Is this a David vs. Goliath battle, or should it be more of a
truce in an industry where, rather than one foe slaying the
other, there is space for both adversaries to co-exist?
With the demise of electronics retailer Circuit City, Best
Buy and Wal-Mart Stores are ramping up their struggle to
capture added share of the consumer electronics market.
Best Buy, the nation's largest specialty electronics
retailer, is positioning itself as the provider of quality
service and sales help to consumers who are often baffled
by high-tech merchandise. The company is focusing on
more high-end products and new interactive features to
differentiate itself from the big box atmosphere at
Wal-Mart, the world's largest retailer, is using its dominance in the global marketplace across all retail
categories to position itself as the low-price option in consumer electronics. The chain also has massive
reach with consumers. More than 800 million people a year visit a Wal-Mart store to buy everything from
groceries to sweatpants to gasoline. In what's seen as an attempt to compete with Best Buy, the chain is
adding a new emphasis on electronics, including big-screen televisions and Apple iPods.
Wharton faculty and industry analysts say instead of fighting to the death, both stores can coexist if they
follow clearly defined strategies focusing on service and price. "The good thing, the consumer electronics
market is big enough that one doesn't have to grow at the expense of the other. They can find their own
space in the marketplace and prosper together," says Wharton marketing professor
He and other Wharton faculty predict that Best Buy is likely to gain the biggest share of sales left behind
following Circuit City's liquidation in March. After 60 years in business, the Richmond, Va.-based
retailer, which peaked with 700 stores and sales of roughly $10 billion, became a casualty of the current
recession and competition from Best Buy, Wal-Mart and others.
Best Buy, which announced surprisingly strong full-year sales of $45 billion in March, has 900 U.S. stores
and is the nation's largest electronics seller, according to market research firm NPD. Wal-Mart, with total
sales of more than $400 billion, does not release figures for individual categories, but NPD estimates that
last year it was second to Best Buy in consumer electronics sales, followed by Dell, Circuit City and
Wharton marketing professor
suggests that the key to Best Buy's strategy is offering
customers knowledgeable service from a youthful, somewhat geeky sales force identified by their bright
blue shirts. He imagines how a consumer confused about whether to buy an LCD or plasma screen
television would approach the purchase: "Would I go to Wal-Mart or Best Buy? The answer -- no doubt
about it -- is Best Buy. Best Buy has the personnel who [can] help advise me."