The Computer Doctor centers, which will repair computers and install software, are aimed directly at stores such as Radio Shack and CompUSA, which dominate the market for helping consumers with their computer problems.
The venture could also help boost Wal-Mart's sales of electronics merchandise by carving a separate place, within the store, to ease the concerns of technophobic customers.
No track record
Wal-Mart sells computers in 1,400 of its about 3,000 U.S. stores year-round and adds computers to all its stores for certain holidays or special promotions, though it hasn't established much of a track record as a seller of computers.
While Wal-Mart has just begun the test, the retailer has a reputation for rapidly rolling out concepts if a test is deemed successful. Recently, Wal-Mart began testing coffee bars and bath shops in the same way, leasing space in the front of some stores to outside operators.
"We're going to see what customer response is" before making any decisions about expanding the Computer Doctor concept, a Wal-Mart spokeswoman said. She declined to discuss the time frame or expectations that Wal-Mart has set for the test.
Wal-Mart's first Computer Doctor opened last week in Ankeny, Iowa, a suburb of Des Moines. Nine other stores will have the centers sometime next year.
Wal-Mart is also testing kiosks in several stores that let shoppers order computers and accessories that are then delivered to their homes.
While Wal-Mart currently isn't integrating Computer Doctor centers into its Web site, several analysts see future links.
"I'd be very surprised if they don't go after that in a big way," says Jeffrey Hill, managing director of Meridian Consulting Group Inc., Westport, Conn. He calls the test "classic" Wal-Mart strategy for entering a new business.
Wal-Mart is expected to roll out a new Internet shopping site in time for the coming holiday selling season but has provided few details of the much anticipated Web site.
The latest computer venture pairs the world's largest retailer with a tiny company in Aberdeen, S.D. Closely held Computer Doctor Franchise Systems Inc. has 38 stores that generate about $10 million in annual sales, said its chief executive officer and founder, Lonnie Helgerson, who owns the company with his brother Phil Helgerson. Most of the Computer Doctor stores are stand-alone operations, primarily in the Midwest.
According to Lonnie Helgerson, Wal-Mart, based in Bentonville, Ark., approached him in February after reading about his business in a franchising magazine.
Computer Doctor centers within WalMart stores won't carry products such as new computers, printers or printer ink cartridges that Wal-Mart already sells in its stores. Instead, the centers will stock used laptops and printers, as well as cables and other accessories, Helgerson said.
As a result, he's banking on increased traffic from regular Wal-Mart shoppers and services to compensate for lost sales of products that a regular Computer Doctor store would have sold. Usually, Computer Doctor stores get about half their sales from products; in Wal-Mart that should drop to about 30 percent, he says.
Specific terms of the arrangement between Computer Doctor and Wal-Mart were not disclosed.
Unlike regular Computer Doctor stores, the ones in Wal-Mart will be open Sundays and stay open longer, at Wal-Mart's request. The centers will be identified by bright red neon signs and will be staffed by four employees, two of whom will be technicians. The centers will charge a flat fee for a menu of different services and also make house calls.
If Wal-Mart decides to expand the concept to a full-blown presence in its stores nationwide, that could pose a major competitive threat to electronics retailers, many of whom have service offerings.
Radio Shack's 7,000 stores across the country already offer similar services. That service capability "is one of our strengths," said Bob Kilinski, vice president of Tandy Services, a unit of Tandy Corp., the Fort Worth, Texas, parent of Radio Shack. While he declined to comment on the Wal-Mart entry, Kilinski said, "We handle the product from cradle to grave. Consumers feel good about that."
A spokeswoman for CompUSA Inc. (NYSE:CPU) in Dallas noted that it already offers a broad array of services, including 24-hour telephone help. "We have a much more extensive variety than they (Wal-Mart) have, and technology is what we are known for," she noted.
General retailers have struggled to sell computers because the profit margins are razor thin, trained salespeople are hard to retain, and managing the fast changing product inventory is difficult.
Wal-Mart's rival, Kmart Corp., Troy, Mich., for instance, doesn't carry computer hardware. "Most of our customers wouldn't come to us to buy PCs and a lot of computer equipment," said a spokeswoman for Kmart. "They wouldn't expect that from us."