Wal-Mart’s move is likely to give a lift to sales of Internet-ready televisions and disc players, which generally cost a few hundred dollars more than devices without such connections. These products allow people to watch movies and shows over the Internet, bypassing their traditional cable or satellite service.
The deal could also allow Wal-Mart to one day sell a variety of other merchandise through people’s televisions via the Vudu service.--
Given Wal-Mart's scale and reach, this is potentially an important strategic move under convergence of industries. What's your assessment of this move--is Wal-Mart emulating Amazon? Does Wal-Mart have the competencies required to be a key player in the digital space?
More broadly--what does it mean for Apple (iTunes), Amazon (video on demand), Google (YouTube) and Sony?
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Wal-Mart's move into the digital space may reflect the commoditization of digital content. With lower barriers to entry it will be interesting to see what kind of services enhance consumers' digital content experience. We already see Netflix not only moving to distribute content online but also enhancing its
ReplyDeletealgorithms’ predictive capabilities via the Netflix Prize contest this past fall.
This surprises me that Wal-Mart would potentially try to "sell a variety of other merchandise through people's televisions." I assume this means they would try to sell traditional products normally found in their stores while people are watching a television show or movie. I don't personally think Wal-Mart's business strategy would lend itself well to this model. As we've learned in other classes, Wal-Mart makes money by using its scale and volume to force supplier costs as low as possible and to generate really high inventory turnover. Moving to a digital model where consumers are not as apt to impromptu purchases (yes, I really do need a new broom) could mean their inventory turnover ratio is changed.
ReplyDeleteAdditionally, I think a lot of companies are very wary of Wal-Mart given their reputation of squeezing suppliers. To make this move work, I think Wal-Mart would need to strike deals with the content providers and here I think Wal-Mart's reputation as a squeezer of suppliers would really hurt their negotiations.
I actually see this move as a positive for Wal-Mart. Given its size and scale, I believe Wal-mart will enjoy virtually the same freedom to squeeze suppliers as they do within the traditional retail market as at the end of the day they will most likely be selling the same products (only in a different way). Their logistics expertise should also come in handy in the e-commerce space when it comes to coordination of orders.
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