Wal-Mart's Early Holiday Price Cuts Pressure Rivals
Nov 15, 2006
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Wal-Mart began marking down prices in October this year, much earlier than usual, and it has added more name-brand goods to its arsenal, which may make it even tougher for competitors to stick to their pricing plans, according to Reuters.
Reuters reported that most chains, such as Target Corp., Bed Bath & Beyond Inc., Sears Holdings Corp., Circuit City Stores Inc., and Best Buy Co Inc., declined to comment on a competitor's strategy, but Target executives called Wal-Mart's price-cutting campaign "business as usual," and said it would respond aggressively.
The day after Thanksgiving--known as Black Friday because it used to mark the date when retailers turned a profit for the year -- is still seen as the traditional start to the holiday shopping season. But Wal-Mart and others have begun advertising earlier and earlier, hoping to lure customers before the last-minute clearance sales, which tend to generate smaller profits. Goldman Sachs analyst Matthew Fassler said a review of Black Friday ads showed Wal-Mart's 42-inch plasma TV for U.S. $988 among the best deals, although Best Buy had the lowest price on a 32-inch LCD model and Circuit City was not far behind.
Wal-Mart's price cuts appear to be getting consumers' attention. A holiday shopping survey of 1,000 adults by America's Research Group between November 8 and November 10 found that 89 percent planned to shop at Wal-Mart. Some 72 percent planned to go there for electronics.
Wall Street has been watching anxiously to see whether electronics chains Circuit City and Best Buy would flinch after Wal-Mart announced steep markdowns on hot items such as Panasonic plasma televisions. Panasonic is a key brand for Wal-Mart because it has consistently ranked among the top-rated for plasma televisions in the influential Consumer Reports magazine.
Carter Cast, chief executive officer of Walmart.com, told Reuters in a recent telephone interview that those larger Panasonic plasma TVs were selling particularly well online, singling out the 50-inch model that costs $2,348.
Wal-Mart has a lot riding on this holiday season. The retailer posted back-to-back months of disappointing sales growth in September and October, and has forecast flat sales at its U.S. stores open at least a year in November. If sales remain sluggish in December, fourth-quarter profits would likely suffer.
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