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Walmart v. Best Buy: The New Battle of the Geeks

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Best Buy (BBY) and Walmart (WMT) are fighting on a new front: trying to become a place for high-tech consumers to shop for futuristic electronics.

Sure, Walmart will tend to battle on price, but it is also trying to boost its geek quotient with its recent purchase of the VUDU home entertainment service, for example.

At the same time, Best Buy is scoping out its own territory, taking a small but significant pace forward on the hardware side: Opening  its first Magnolia Design Center in southern California, as part of its store in Costa Mesa.

Magnolia is a home theater and entertainment hardware business it acquired a decade ago, one that puts fancy gadgets into homes or even out on decks for consumers who want to feel as if they are getting the best possible experience. If they’re watching movies, it should be as if they are in a theater. If they are listening to a symphony, it should be as if they are in the concert hall.

Best Buy operates limited Magnolia operations in many of its stores, but the full-blown Design Centers have been limited to seven until now. With its Costa Mesa move, Best Buy is making a statement that high-end audio and video remains a Best Buy priority. Design Centers stock premium brands such as MartinLogan, Pioneer Elite and Sonus faber. The Costa Mesa Magnolia Design Center showroom includes a fully functioning theater, great room and an outdoor patio. The operation offers the 103” Panasonic HDTV, the world’s largest plasma set, and a Control4 system that allows customers to control a home theater system, lights, temperature and security from a single remote. It also offers a bedroom display that demonstrates how an HDTV can rise out of a dresser at the push of a button and a bathroom set up featuring a flat screen HDTV that hangs invisible inside a mirror until the TV is turned on.

The significance of the expansion is partly the region. While the Golden State is still hurting, Best Buy is setting up shop in time to become a trend setter when conspicuous spending is again in vogue.

That’s because Best Buy wants to beat WalMart and everyone else in the home theater market. In its third quarter conference call, Brian Dunn, president and COO said that he sees 2010 as the year to “take a disproportionate share of customers’ wallets.”

An interesting element in all this is that the higher-end home theater equipment is just the kind of thing that Walmart wants to hook up to its VUDU service and Best Buy wants to tap with its home entertainment partner Sonic Solutions (SNIC).

In raising Magnolia’s profile early in the recovery, particularly in places where it can get on the radar of trend setters, Best Buy is trying set itself up as the first stop for the best gear as consumers, a few at a time, gain the confidence to splurge.

The contest, by the way, isn’t for the super techie who knows so much about home theater equipment that buying on line is the best bet, but for the person who is stepping up to elite status and needs to see and hear the equipment. So the adversary is Walmart, with its VUDU purchase and expansion of high-end flat-screen televisions, and Sears, too, to some extent, which has also been investing in  TV and electronics services.

Last Updated ( Friday, 11 June 2010 16:43 )  
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