I was surprised to see a category for consumer electronics on Home Depot's (NYSE:HD) website. The featured top sellers? At the moment, a 42-inch Philips plasma television and a larger 50-inch Panasonic set.

Home Depot? HDTV mogul? Digging a little deeper into Home Depot's online store, I found video games, GPS devices, and even computers. Change that orange to blue, and you'd have to rub your eyes to make sure you weren't looking at BestBuy.com instead.

So that's why they call it hardware
Naturally, Home Depot isn't the only company with no problem stretching its product line's breadth on the Internet. Even the denim and khaki mavens at Gap (NYSE:GPS) can stock an online shoe store that would make Imelda Marcos jealous, thanks to the central warehousing benefit of e-tail.

But this isn't simply a Web experiment. According to Twice.com, Home Depot is stocking its stores with several flat-panel sets, as well as home theater systems, digital cameras, and DVD players.

The aim is seasonal. Whether these items are still stocked come January may be anyone's guess, until we see how customers take to the new offerings. Home Depot thrives as a haven for do-it-yourself shoppers and cost-cutting contractors, so even if the sales prove to be incremental, the new lines may be gone if they prove too distracting and brand-blurring.

However, for one holiday shopping season at least, conventional consumer-electronics superstore chains like Best Buy (NYSE:BBY) and Circuit City (NYSE:CC) have one more threat to worry about.

Orange aprons, red flags
The name Home Depot may not seem to break the gang at Best Buy into a cold sweat, but it's just one more company gunning for consumers' electronics dollars. You already have Wal-Mart (NYSE:WMT) targeting price cuts throughout the category to keep itself relevant when holiday shopping kicks up in earnest in two weeks. Even if we can all agree that widescreen high-def televisions will be all the rage this year, it's naive to believe that the superstores will once again pummel the competition solely because of their selection advantage.

The cracks are already there in some of the smaller players. Last quarter found Tweeter (NASDAQ:TWTR) sporting a disturbing 13% slide in comps for the period. Sizing up Tweeter against its larger consumer-electronics rivals shows a clear disconnect, but what if it's the Ghost of Christmas Future coming over for a visit?

Last Quarter's Comps

Best Buy

4%

Circuit City

8%

Tweeter

(13%)

The key to success at Best Buy and Circuit City lately has been a boost in laptop and television sales. Where else do folks tend to flock to when they need new portable computers? Dell.com? HP.com? Guess what -- they're both selling widescreen LCD and plasma sets off their landing pages, too! Hewlett-Packard (NYSE:HPQ) is even marketing its new MediaSmart set, which converges television viewing with Wi-Fi connectivity.

The crowd is here
Which of these things haven't you seen lately?

  • Vending machines that sell iPods.
  • Internet heavies selling digital downloads.
  • Drugstores selling digital cameras and DVD players.
  • 7-Eleven bundling 32-inch LCD televisions with frozen Slurpees.

The only one that I haven't come across is the Slurpee combo, though maybe I should have asked for the Big Gulp bundle instead. My point is that consumer electronics have become so ubiquitous in retail that everyone is doing it this season.

As much as I love Best Buy, I'm worried. I'll never discount Wal-Mart's voracious appetite for gnawing on category-killers after I saw it virtually dismantle Toys "R" Us. I also have complete faith that Home Depot, losing traction in a sluggish real estate market, will latch on to consumer electronics for now as a way to redefine home improvement.

It's not time to bail on Best Buy, but I'm going to be watching holiday comps like a hawk. Overcrowded marketplaces have a funny way of making everybody look bad.

Best Buy and Gap are Motley Fool Stock Advisor recommendations. Home Depot, Gap, and Wal-Mart have been singled out as Inside Value stock picks. Follow the links to try either newsletter free for 30 days .

Longtime Fool contributor Rick Munarriz prefers shopping at Best Buy to Circuit City, though he remains a fan of Best Buy blue and Circuit City red. He does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. T he Fool has a disclosure policy.