When Wal-Mart wants to dominate a merchandise category, it usually gets its way. And the world’s largest retailer is showing that it wants to be No. 1 in consumer electronics.

It has remodeled the electronics departments in about a third of its U.S. stores to accommodate big-screen plasma TVs, rows of digital cameras and satellite radio displays. It has bumped up its breadth of brands including Canon cameras, Toshiba notebooks and Sony camcorders. And it has started offering warranties on some products and service contracts with wireless phones.

“This year, they’re going after the well-heeled consumer and the enthusiast,” said Alan Wolf, senior editor at industry trade publication TWICE. “It’s too early to tell because they haven’t made a total transformation. It’s a start – and a scary proposition for electronics retailers.”

Reaching No. 2

By selling low-price televisions, DVD players and cameras, Wal-Mart Stores Inc. moved ahead of Circuit City Stores Inc. into the No. 2 spot in TWICE’s 2003 sales rankings.

The discounter is still No. 2, with U.S. electronics sales last year of $12.11 billion (not including sales of $2.07 billion at its Sam’s Club chain). Best Buy Co. is No. 1, with sales of $20.75 billion.

Wal-Mart management has said it views electronics as a way to entice customers from its grocery aisles to the other side of its stores. Although Best Buy still has a substantial lead, and electronics chains trump the discounter on selection, service, installation and warranties, no one is underestimating Wal-Mart.

Wal-Mart is seeking to become a bigger player in the electronics market. It recently was listed No. 2 in sales rankings, with 2.11 billion last year.

When asked about Wal-Mart’s potential in consumer electronics, analysts shrug and point to toys and groceries. The discounter reigns in both categories.

“Wal-Mart always wants more. In this category, it’s No. 2, but Wal-Mart doesn’t like being No. 2 when it thinks it can be No. 1,” said Edward Weller, retail analyst at ThinkEquity Partners LLC. “It wasn’t that long ago that people didn’t think they would take the toy lead.”

“Talk to the food guys a few years ago,” CompUSA Chief Executive Larry Mondry said about Wal-Mart’s fast rise to become nation’s No. 1 grocer. Dallas-based CompUSA is the eighth-largest electronics retailer.

So far, electronics is Wal-Mart’s best-selling category online, said Wal-Mart.com spokeswoman Amy Collela.

“We offer an expanded assortment of electronics to complement our stores on our Web site,” she said.

Top-selling items

Its top-selling item online this holiday season is its proprietary mobiBLU Cube. The 512-megabyte MP3 player sells for $99.72 and is the retailer’s answer to Apple’s wildly successful iPod. It comes with five free Wal-Mart music downloads.

Wal-Mart is now the leading major retailer of wireless phones. Rankings released in early December showed that it moved ahead of RadioShack Corp. in the category during the third quarter.

When Dell Inc. expanded into printers, cameras and flat-screen TVs a couple of years ago, TWICE’s Wolf remembers Best Buy management calling Dell “dangerous.” But it wasn’t until Wal-Mart moved ahead of Circuit City that Best Buy started to respond to the competition with its “customer-centric” stores, he said.

Almost two years ago, Best Buy defined what these new and remodeled stores would look like and what items they would carry, based on neighborhood demographics. It opened several of these stores in California and acquired an upscale home theater company called Magnolia.

On Dec. 13, Wall Street battered Best Buy’s stock price after the retailer said higher spending on new initiatives – including its customer-centric stores – and stiffer competition in Canada had cut into third-quarter profits.

So far this holiday season, Circuit City’s aggressive pursuit of market share has made the environment more competitive for Best Buy, Goldman Sachs analyst Matthew J. Fassler said in a report Dec. 14.

He downplayed the impact of Wal-Mart and Target Corp. on the consumer electronics specialty stores, for now: “The threat from discount stores on near-term results has been overstated, but as flat-panel TVs commoditize, discounters will grow more relevant.”

Wal-Mart advertised a big-screen TV for just under $1,000 and a $387 laptop computer the day after Thanksgiving. Both sold out, said Wal-Mart spokeswoman Gail Lavielle. “Those were our blitz products, but we’re also selling out of some digital cameras and combo TV and DVD players,” she said.