George S. May Business Blog

Wal-Mart Expands Into the Digital Marketplace

There are few sentences that include both the words “Wal-Mart” and “expansion” that would shock many people. Wal-Mart has always been a symbol of corporate gigantism, and their lightning-fast expansion into the American marketplace would make the black plague envious. Wal-Mart has moved quickly and aggressively into so many marketplaces,  which when coupled with rock bottom prices has made for one of the most successful corporations in the history of the word.  Wal-Mart’s power in part has long been derived from the chain’s massive size and the incredible bulk purchasing power inherent to such stores.

It is this size and strength they hope to wield as the company makes its’ next big move:  digital entertainment. The same digital entertainment that is currently being supplied by Amazon.com, Best Buy, iTunes and the Apple Store, and cable giants like Comcast and Wide Open West to name a few. Wal-Mart does not see these companies as a reason not to get into the same racket. Perhaps this lack of hesitance has to do with a more complex strategy being carried out by the last Iron Fist of everyday low prices.

Wal-Mart will be carrying out this foray into the digital realm with the acquisition of a company called VUDU, which provides on-demand video access to television series, movies, and other forms of digital entertainment. This service would eliminate consumer need for a cable provider and would allow people to purchase their entertainment a la carte, while presumably enjoying what are likely to be some significant savings if their history is any indicator.

Wal-Mart began selling digital music online some 4 years ago, but most people are still not keenly aware of their presence in this area, largely due to iTunes dominance of the digital music marketplace. Some believe that the reason Wal-Mart hasn’t been able to trounce Apple in this market is due to the lack of integration: to use Wal-Mart’s music you need an MP3 player compatible with the content they sell, and then separate software to upload said music to a device. Apple’s iPod plugs in to a computer and seamlessly works with the software to automatically manage music on the computer and device simultaneously.

This suggests that consumers may not care about a lower cost if it means more work will be required on their end to get the same gratification one can instantly achieve with the iPod. And Wal-Mart has obviously taken care to ensure that a similar situation doesn’t develop with the execution of their VUDU acquisition, by ensuring any internet-ready television can connect and get their entertainment fix immediately, with no lines, and no waiting.

Moreover, it can be assumed that if Wal-Mart has a share of such a marketplace, that they will presumably analyze the data they will be privy to in order to more effectively market their store and its’ products to consumers who are not simply metaphorically glued to the tube.

Even for the internet’s meteoric rise in modern culture’s mindshare, it is still only a fraction of the time that people spend watching their favorite programming (or the favorite programming of their significant other while they desperately ponder how to get the remote control back).  Nevertheless this situation of emerging in a digital marketplace presents a huge opportunity for Wal-Mart to literally get into the homes of consumers and find out their habits and influence spending habits before people get to the store, which could mean Wal-Mart may win the war even if they lose the market share battle.

It’s likely that the winner of the digital media wars will be the company that can offer the best combination of value, service integration, and consumer demand. The companies Wal-Mart hopes to siphon business from have nothing else to do but worry about the purchase and viewing of such entertainment, while Wal-Mart has several other corporations’ worth of businesses to oversee.

Still in the end, the hope is that the end result of this corporate chicken fight will be lower prices, more choices and better access to people everywhere, and not just another venue to view Wal-Mart commercials.

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