BENTONVILLE, Ark. -- Wal-Mart here said it will begin test-buying products directly from three software publishers currently handled by GT Interactive, New York, the retailer's primary software provider.
A test with the three publishers -- CUC International, Stamford, Conn.; LucasArts Entertainment Co., San Rafael, Calif.; and Electronic Arts, San Mateo, Calif. -- is slated to begin some time in the second quarter. A Wal-Mart spokeswoman said that the test does not signal the beginning of a trend.
"There are no plans to enter into any other direct relationships," she explained, adding that Wal-Mart is pleased with the job GT is doing. "We are still going to be doing major business with [GT]."
Last year, Wal-Mart started buying products directly from Disney Interactive, Burbank, Calif., which GT had also been distributing. Until Disney began shipping to Wal-Mart directly, GT had been the exclusive software vendor to Wal-Mart since 1993, placing software from about 120 publishers on the retailer's shelves.
After the three other publishers ship directly, GT will handle about 85% of Wal-Mart's assortment, according to GT. GT also ships products directly to Target Stores, Minneapolis. Aside from Wal-Mart and Target, GT ships its own products directly to retailers that include Toys 'R' Us and Electronics Boutique. A GT spokeswoman said that 1996 sales of products from CUC International, LucasArts Entertainment Co. and Electronic Arts comprised less than 5% of GT's total revenue.
The sale of those companies' titles at Wal-Mart accounted for $20 million of GT's $365.5 million revenue in 1996, according to GT.
The upcoming direct test had been expected by GT. "It was a matter of not if, but when," the spokeswoman said, adding that more companies could begin shipping direct to Wal-Mart. "As the industry consolidates and business grows, a limited number of companies would likely go direct with Wal-Mart. We think it is a natural occurrence in a growing market."
Mike Yocco, an analyst at Paul Kagan Associates, Carmel, Calif., said the growth of such direct relationships is due to margin compression.
The growth of direct relationships will be limited because "there are only a handful of publishers that can provide the necessary services," the GT spokeswoman said. Those services include inventory management and planogramming, which would be necessitated by a direct relationship with a mass merchant such as Wal-Mart.
GT Interactive publishes "Duke Nukem 3D," which was a best-selling title in 1996, according to market researcher PC Data, Reston, Va. GT has high hopes for four game titles -- "Unreal," "Odd World Inhabitants," "Blood," and "Total Annihilation" -- which will debut later this year.