Tuesday, February 23, 2010

Wal-Mart & VuDu Desperate Strategy?

Wal-Mart (WMT) announced the acquisition of VuDu a video download service that Wal-Mart clearly hopes to leverage to counter what surely must be a growing decline in movie DVD sales. If it’s cool enough they probably have sugar plum fairy dreams of dominating the electronics and home entertainment market and give Best Buy a run for their money.

At the strategic level this sounds excellent. But Wal-Mart does not have any viable expertise in deploying technology and leading the consumer. It’s only successful skill is deep discount value pricing complemented by massive box store locations which kill all other competition.

Wal-Mart has done very well by beating up its supply chain to deliver even cheaper price points. The consumer of global culture does not buy a new movie because it is cheap. The movies get buzz and people become excited because it is cool. I do not see Hollywood complying with Wal-Mart putting the squeeze on them for lower pricing on principle.

Not to mention the technological risks involved with running a movie download business. Many players with money and expertise have been working on this market segment for a long time and still do not have it right. Wal-Mart does not have an edge in this field.