PC Parts and Wal-Mart? No Match

Written by Evan Schuman
May 5th, 2006

By Evan Schuman
When Wal-Mart moves into any new area, it spreads fear into the hearts of retailers, who see any move by the $312 billion store chain as inherently dangerous.

But Wal-Mart’s recent effort to move more aggressively into the computer business is unlikely to merit panic. It will still cause a lot of it, but it won’t be merited.

Wal-Mart’s computer move is initially playing itself out in two customized ways: selling computer parts, so that customers can purchase CPUs, monitors and keyboards and create their own desktop; and selling assembled computers that do not have any operating systems.

The second move would have been more compelling if it were positioned as an altruistic humanistic position. Maybe an ad campaign that says something like, “Because of our immense respect for our customers, we could no longer bear to inflict a Microsoft OS on them. If they do it to themselves, we’ll sleep better. We prefer to torment our customers in other ways.”

Alas, the OS-less PCs are positioned for flexibility and cost-effectiveness. The risk to Wal-Mart is that some customers may not realize that they are buying PCs that won’t work without additional purchases.

Clearly, the Wal-Mart employees working in that department would make sure that customers understood what they were purchasing. The silliness of that last sentence points out the problem. A do-it-yourself strategy?regardless of whether it’s Wal-Mart’s hardware or OS approach?relies on a substantial customer service component, which has always been the extreme weak spot for Wal-Mart.

This computer move is part of a larger positioning shift for Wal-Mart, which is trying to pull in more upscale consumers. Wal-Mart is reviewing its almost $600 million annual marketing budget and considering assigning it to a different ad agency, for the first time in 30 years. Although that move might at first glance seem to be of little interest outside of Madison Avenue, it signals changing thinking at Bentonville headquarters.

The problem with the computer approach is that it doesn’t mesh with how people buy computers.

First, if well-heeled clientele are the target, those are people who want and expect extensive customer support, which is not what Wal-Mart is designed to deliver. Even worse, the customized PC approach?both for OS and components?is arguably the most sophisticated kind of tech support. It doesn’t merely require that the employee know the spec sheets and can explain basic functions, in the way they might in selling a dishwasher.

No, a customized computer sell requires those employees to understand all of the implications of a computer environment. They need to ask about the kind of applications the customer plans on using, how much data they’ll likely need space for and whether their particular needs are especially RAM-intensive. Even computer-specialty chains like CompUSA have great difficulty hiring a lot of people who can intelligently ask those questions and know what to recommend when they hear the answers.

In other words, Wal-Mart?which has horrible support in the stores for simple “Which aisle is this product?” questions?has taken on a task requiring the most sophisticated customer service.

All of that was for the high net-worth customer that this intended to attract. But what about the geek who already builds his own desktop machines and simply needs components from time to time? Will they suddenly become Wal-Mart regulars?

Not likely. Yes, it’s true that those people won’t need a high level of customer support. But those customers are also likely to be comfortable with e-commerce and fond of the wide range of components available on the Web to those who know what they want and where to look.

Wal-Mart does its core strength going for it: convenience (tons of local stores) and the buy-in power to deliver very low costs (and without any ship charges).

This will go back to inventory. If they devote enough floor space and buy a very comprehensive package of components, they might make a dent in geek purchases. If Wal-Mart becomes to PC components what RadioShack has been to cable connectors, they might have a shot, but even that wouldn’t likely help them with the high-income people they want.

“Have it your way” may have worked for Burger King, but it’s not likely to work for Wal-Mart. Come to think of it, it didn’t work for Burger King, either. Maybe Madison Avenue is worth paying attention to after all.


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