Discount computer part hardware memory

The high-tech explosion among discounters that first became visible about three years ago, continued and even accelerated in 1992. While staples like personal stereo, blank audio and videotape, and assorted rack and shelf systems still dominate the average discounter's selection, the past year was notable for the increased visibility of computers, peripherals and software on discount shelves, along with upgraded audio and video products, a more complete video game selection, and sophisticated personal electronics.

The result is that of the $49 billion or so in CE products sold at retail, about $21.5 billion were sold through discount channels, including $6 billion through full-line discounters, with another $5.6 billion flowing through warehouse clubs and catalog showrooms. Add in the $9.9 billion sold through discount specialty chains like Circuit City and Best Buy, and the mass market accounts for about 45% of all products sold.

Through most of the 1980s, CE was more or less an unwanted stepchild at discount stores, which generally offered only a limited selection of low-end or entry-level goods, aimed primarily at the most unsophisticated shopper.

The ascendancy of Nintendo and Sega may have indirectly caused the upgrading, attracting the cutting-edge customer for CE products, the late teen/early twenties male. At the same time, brands that had previously disdained the mass market now found their dealer base shrinking rapidly, and began actively courting national discount chains. Today, it is not uncommon to find IBM and Apple computers, Epson and Panasonic printers, upper-end Sony and Aiwa shelf systems, and other prestige brands at local discount stores.

Further, as the margins in this category have been pared away by extreme national competition, the balance of power has swung toward the lowest cost providers: national chains. The buying clout, low overhead and low prices of chains are winning customers from high-service, selection-intensive but higher-priced, specialty stores. The major restraining factor in discount growth has been establishing price points that discount shoppers can realistically be expected to pay. Kmart may have dropped a $5,000 Sharp projection TV into one of its stores, but it didn't sell very many, if any.

A major impetus to further pushing the envelope is increasing price parity among the discount superpowers. While Wal-Mart has a definite advantage in public perception of price, in reality, its advantage over Target and Kmart is miniscule at best. With the price war, like the Cold War, more or less a thing of the past, each chain must now attempt to clearly differentiate itself from the others, and all three, particularly Wal-Mart, have settled on CE as a potential point of differentiation.

Of the three, only Wal-Mart has, to date, made a strong commitment to the emerging computer category. The chain now carries computers from several different vendors (most recently, it added Apple, joining Packard Bell and Leading Edge), and backs up that selection with a full offering of peripherals (three sku's of printers, fax machines, fax boards, keyboards) and a strong entertainment and productivity software mix.

Wal-Mart also added Sega to its video game department, and sales in a mere 500 stores were so impressive that Sega was named top vendor in CE for the second quarter. Other Wal-Mart changes: A larger selection of CDs, a full run of computer accessories, including add-on memory, and larger screen televisions.

Kmart, which has wrestled on and off with the computer category, has evidently decided against carrying PC hardware, at least for now. The company tested various items, including IBM's PS/1, and loves the category, but doesn't feel that it can sell enough units to justify the inventory and shelf expense (Wal-Mart managers privately admit that hardware sales are infrequent; it's the message to consumers that's important ... and sales of printers, software, and other related products make up for the lack of PC sales). Instead, Kmart has doubled the amount of space allotted to software, installed an accessory wall, and used the saved space to enlarge its offerings of video game systems and other CE products.

In its newer stores, the chain has also greatly expanded its CD and prerecorded video department, perhaps tripling its sku count. The second Auburn Hills format store, in Tampa, Fla., includes a video jukebox, specialty store fixturing, and much deeper selections of music software, including whole departments for such music subcategories as contemporary Christian, alternative rock, and heavy metal. The department is located at the front of the store, away from CE, and is marketed in much the same way as video rental and sales shops were in various hypermarket formats, with a separate entrance and cash register.

Target appears to be taking a middle road. While it markets Laser and Leading Edge computers, software and printers, its computer department is far more rudimentary than Wal-Mart's. Like many Target hard lines departments, it is much more a convenience area than an indepth presentation. Target invests most heavily in apparel and home decor (including housewares) and in various accent departments, like toys and photo. In those departments, Target offers a selection that no major competitor can match. Consumer electronics, in contrast, is treated much like auto and hardware, with a basic assortment of staples like blank videotapes, various electronic replacement parts, and a modest music assortment, with a small selection of promotional televisions, VCRs and shelf and rack audio systems.

As the computer industry continues to migrate toward mass outlets, and as emerging technologies like CD-ROM, Mini Disc, DCC and others fall to mass level price points, expect to see discounter CE sales continue to soar.