Computer Non-Wars Make for Dull Start to Holiday Electronics Competition
Walmart (WMT) is offering grab bags with its laptops, Best Buy (BBY) is touting a computer for kids, Target (TGT) is selling iPads and retailers generally are doing everything they can to avoid last year's computer wars.
A repeat of last year's struggle on laptops, which threw a sub $300 model into the market for the first time, would probably be an electronics marketing mistake for a few reasons. First, more deep discounting might create a real consumer expectation that a laptop ought to cost around $300, which would put pressure on middle-level computers, particularly if consumers start demanding more and more features to convince them to move up the price spectrum
Second, computer wars would generate skepticism this year, as consumers recognize that the deeply discounted products would be in short supply. Walmart and Best Buy sold out of their sub-$300 computers in short measure last year. So deep discount promotions could be accompanied by long lines of very excited consumers on the day bargain prices takes effect. The most interested consumer would be the ones most determined to get in and grab the object of their desire. Obviously, that kind of situation has had ugly consequences in the past.
Consumers who refused to jump through hoops for bargains on entry-level products would likely ignore the promotions altogether, recognizing that the deals had limited dimensions. Promoting $300 computers really is method retailers use to convince consumers who have $700 or $800 to spend on computers that they offer the best bargains. After last year's big-discount short-supply shenanigans, many consumers are likely to remain skeptical of super discounts.
Third, and worst, shoppers might perceive the quickly sold out bargains as a form of bait and switch, when a retailer advertises a product not in stock to draw customers who are offered another less-choice deal, and they wouldn't be far from wrong. A bait-and-switch reputation can hurt a retailer the way a food-poisoning episode hurts a restaurant. No matter what is done to clean up the mess, some customers are never coming back.
Having learned their lessons last year, consumers would weigh promotions carefully and penalize retailers who aren't playing straight. And it's almost as if major retailers are acting on their best behavior, even if that isn't terribly exciting.
As previously noted in this blog, Walmart focused on bundling accessories packages with its laptops in the back to school selling season, which is when it commenced last year's computer wars by offering the first sup $300 laptop. Those bundled packages still are available although a check on the company's website revealed that the least expensive package was no longer posted
A collaboration with Toshiba, the Best Buys children's laptop offers software designed to limit users from straying into kid-unfriendly territory as defined by the developers. It is a full-scale laptop, however -- with a 13.3-inch display, two gig memory, 250 gig hard drive and a $499 price gag -- and not a web book. It does come with a couple of Disney movies installed as well as a video game, which should generate enough interest to cover a typical kid's Christmas Day.
Yet, after launching on Best Buy's website, the computer wasn't identified as something for kids, suggesting that its promotion awaits or is late. It wasn't even listed under BestBuy.com's gift headings. Click on gifts for boys and a Sony Vaio appears rather than the Toshiba. A click on girls' gifts doesn't even produce a computer, perhaps a subject in itself.
Target launches its iPad product line nationwide on Oct. 3. Customers can select the 16 gig Wi-Fi model starting at $499.99, the 32 gig and 64 gig Wi-Fi models and the Wi-Fi+3G model. Instead of bundling in extras, Target promises to display accessories including cases, iBook and iTunes gift cards, and chargers around its iPads.
So the three retailers each have focused on a product the can promote â€"- with an extra value deal for Walmart, a specialty item for Best Buy and the topically hip device for Target â€" in a way that reflects how they position themselves to consumers and which they can readily promote. But if what retailers are doing now seems a little lame compared to their histrionics around electronics last year, it is. The retailers clearly see electronics as less of a draw this year than last, which means they aren't anxious to touting cut-rate prices in the hope that shoppers will make up for the discounts they get in technology by purchasing full-price sweaters and popcorn poppers.
Computer bargains may come, but retailers seem anxious to take what profits they can in a season when they eventually may be forced to deeply discount inventories built up in anticipation of a more optimistic holiday shopper. And a Nielsen Co. study just predicted that worried consumers would turn spend only as much as they did last holiday season.
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