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Wal-Mart starts a holiday price war

It's cutting prices on products to boost seasonal sales. But investors worry the cost will be too high.

Posted by Charley Blaine on Wednesday, October 21, 2009 7:31 PM

HDTV © Jose Luis Pelaez/Getty Images

The holiday season is supposed to be for giving.

 

Wal-Mart Stores' (WMT) gift to its competitors: a price war.

 

The retailing colossus plans to cut prices aggressively this holiday season in a bid to lure in shoppers looking for bargains, officials said at a two-day analyst meeting held near Wal-Mart's Bentonville, Ark., headquarters.

Under the plan, which started Wednesday, each week will bring cuts for a specific group of products.

 

The goal is to boost market share for the company as the economy struggles to shed a recession.

 

"We will not be beaten on price," said Vice Chairman Eduardo Castro-Wright, leader of Wal-Mart's U.S. business.

 

 But Wal-Mart shares and shares of rivals fell on the news.

 

The company expects a "tough" holiday season, with customers delaying purchases until later in the season, John Fleming, chief merchandising officer for the company's U.S. business, told Reuters. Wal-Mart Stores

 

Toys R Us said Wal-Mart's price moves are not new. "Every holiday season, there is this level of price competition -- we expect it and we prepare for it," a Toys R Us spokesman told The Wall Street Journal.

 

Wal-Mart has already rolled out aggressive price cuts ahead of the 2009 holiday season. It is offering more than 100 toys for $10 each.

 

It plans a big push in entertainment products this season, Fleming said. Which means Best Buy (BBY) may feel the heat.

 

Wal-Mart has already started a price war over books, cutting prices at Walmart.com on highly anticipated hardcover books by 60% or more to $10.

 

When rival Amazon.com (AMZN) matched the prices, Wal-Mart lowered its prices to $9. When Target (TGT)  entered the fray with $8.99 prices, Wal-Mart went down another penny to $8.98.

 

If the moves sound great for consumers, investors weren't thrilled and pushed Wal-Mart shares down 2.1% to $50.63.

 

The stock is down 9.7% this year and is the second-worst performer among the 30 stocks in the Dow Jones Industrial Average ($INDU).

 

Amazon.com was off 1.6% to $93.43. (The company reports third-quarter results after Thursday's market close.) Target fell 2.1% to $48.90.

 

Book sellers Barnes & Noble (BKS) and Borders (BGP) dropped 2.7% to $18.40 and 6.1% to $2.60, respectively.

 

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#1
Wednesday, December 02, 2009 5:34:00 PM
I see this all the time and yet no one seems to understand the big picture. People always bash Wal-Mart due to job losses for local or "better paid" jobs. Think big people. The money saved by individuals through lower prices is a large stimulus to our economy that more than offsets the loss of jobs. That means more money for EVERYONE, both Wal-Mart, Wal-Mart shoppers and people that have nothing to do with Wal-Mart (because the money saved is going to be spent somewhere else or saved). Yes, no one likes layoffs. Yes, exchanging higher paid jobs for lower paid jobs is generally bad. But there is a whole invisible, back-end, large scale efficiency boost to our economy. One of our economy's biggest strengths is its high efficiency. It makes no sense to reverse the trend. There are both winners and losers to economic change. In this instance, the winners far outweigh the losers.
Saturday, October 24, 2009 9:56:02 PM
I have 24 rental units and I have never had a question on a faucet of where I purchased it.  YOU are full of *^&^**.  the plain box is to cut cost.  Do you actually think the supplier is going to re-engineer a damn faucet to sell to the big box stores!.  you need OXYGEN!
Saturday, October 24, 2009 1:58:45 PM

People like you, For We the People, should stay out of conversations such as this one. Why. You are one sided and only believe what you "believe" you know to be fact, and that isn't saying much. You should get more political education so you don't make yourself look so bad in here.

 

As far as Wal-Mart. They are out there just as any business is. They will either survive or fail. It all comes down on how the company is run. People will still flock to Wal-Mart and Sam's Club no matter what anyone says in here. It's no different than going to Home Depot to purchase a Moen faucet. Ever wonder why Home Depot's Moen faucets come in a different color box than what a plumber can get from a supplier? That's because of the quality of the product. After all, Moen wouldn't want all those plumbers bad mouthing them. That's why when you purchase from a supplier the faucets are in a White Box. Check it out the next time you are in the store. What these type of stores have done is put a much cheaper product on their shelves that are defective. Believe what you want, but it's no different than buying a shirt from Wal-Mart and buying a Ralph Lauren Polo shirt from Macy's. So, what it comes down to is, if you want "Cheap" go to those discount stores. If not, stop going.

Saturday, October 24, 2009 1:39:59 PM
I started working for Sam's Club (a Wal-Mart sister company) at the age of 17. I worked there a total of 9 years. There were pros and cons to my employment. I graduated high school, then went on to graduate college, all the while being employed there. They worked around my college schedule really well. I was able to take the classes I needed at the times I wanted. That was the only reason I stayed that long. They do not pay well, as others have mentioned. They do not provide 100% health insurance, even if you are full time. You must pay a percentage out of pocket. In the end, I ended up making less than $15 dollars an hour after 9 years of employment. BUT- they worked with my college schedule incredibly- better than most any employer out there. I think it is important to have goals in life, educate yourself. I used Sam's Club as a stepping stone. You have to take the good with the bad, just like any employee.
Saturday, October 24, 2009 10:49:20 AM
What happened to the Made is the USA program that walmart used to have. The reason i hate to even go in walmart is that over 99% of the items are made in china. Cheaper labor is the name of the game but the items are inferior and if no one in the USA is working who will be able to buy them. Dont forget the pet food fiasco.
Friday, October 23, 2009 12:28:29 PM
I am sure I make less money than anyone one here but I have not stepped foot in a WalMart in over 8 years.  I would much rather go to the local toy store where they remember my name, have weekly events for my kids, and support employees by offering a very good job.  As Americans we have become so spoiled that we will save a buck on one thing that we can buy 10 more things.  Instead of buying 10 recalled, junk toys that you will throw away before next Christmas, buy something of better quality to pass on to your grandkids!  Quality not quanity!
Thursday, October 22, 2009 7:27:07 PM

Walmart is a dead man walking. Their business model is already failing. Walmart needs to lower prices by developing an internet business; reduce real estate and other store expenses by shipping more and thereby require smaller and fewer stores while increasing volume.

 

The future of Walmart is Kmart.

 

 

 

 

Thursday, October 22, 2009 6:51:56 PM
Walmart can only exist to keep up their bad ways of destroying our way of life if we continue to shop there.  Just say no to Mal Wart.
Thursday, October 22, 2009 6:41:40 PM
Hopefully everyone saw the movie The High Cost of Low Price about Walmart.  Shopping at Wal Mart is just like voting for Republicans, it is against your own best interests.

Both groups are in favor of big money corporations, outsourcing jobs and getting rid of small businesses and the middle class.  All for the bottom line at the expense of our way of life.

Thursday, October 22, 2009 6:32:54 PM
Well I live in an area that had a great corporation that had good prices and many people I knew had good jobs and retired from this corporation until Walmart came around now they are still a great company but the benefits are bad and you don't retire from there anymore for the most part because they had to compete.  So all those jobs that were concrete and left people secure through their lives are gone, but that is not why I don't shop at Walmart.  I am a healthcare provider and I have had more than one Walmart employee that had lost their job or been cut back so they don't have benefits while being treated for cancer who have worked for Walmart.  So whoever shops there that is ok it's a free country and if it's the cheapest and closest I understand how it is to make ends meet, but for me I have to go to work and treat these people who Walmart has put in jeopordy so I just can't support a  multimillion dollar corporation that can't afford to support their employees, but can start price wars.  That can eliminate positions of employees that have worked there for years in the middle fighting for their lives and sleep at night.  Sorry!
Thursday, October 22, 2009 6:29:10 PM
i agree...hell oprah shops at walmart.Tongue out
Thursday, October 22, 2009 6:24:27 PM
Wall Mart. The future of America. 70% are part time (around 20 hours a week) in most stores, well over half are not offered insurance, and many of those offered can not afford insurance. Wall Mart treats the average employee like a piece of meat. Many managers have serious attitude problems and throw tantrums like a 6 year old. But hey, prices are cheap right? Not in the long run because less and less people in America will have jobs that pay enough to get by. Many jobs that are part time will not work with you so you can have a second job. Wall Mart and other big companies like that are your future. Enjoy!
Thursday, October 22, 2009 6:18:33 PM

It is interesting to read through the message chain and see ALL the other issues people seem to relate to Wal*Mart.

I have been, designing, costing, sourcing (in China) and selling goods for over 15 years, NOT just to Wal*Mart but ALL retail outlets.

I hate Wal*Mart, because they are big and so powerful. But ready for this... they are our MOST profitable account. We make more $ from Wal*Mart then any other retailer.

Wal*Mart will sell an item for 5%-10% profit if they feel the need and ask nothing from us, except make the item better... cheaper. That is the hard part, it is up to US how to make it cheaper. Easy way out... send it to China... or make the item crap. But in the end all they ask is make it better.

Target will sell the same item at the same price and comes back to us and asks for "advertising $" a retailers way of asking the manufacture for kick backs, so Target can retail that same item for only 10%... why not the manufacture just gave them 100k in "advertising dollars", and guess what ALL retailers do that except Wal*Mart and the dollar stores.

By the way item MAY not be manufactured in the USA now... but they are all designed & engineered here. Yes we shipped the $5.00 jobs to China and added 3 $50,000 jobs to our company.

ASK PEOPLE IN THE BIZ... THERE ARE A LOT OF US OUT THERE.

Thursday, October 22, 2009 6:07:41 PM
Go Wally World!! I'll join my sister's boycott of them next year but for now woohoo! bring on the bargains!!
Thursday, October 22, 2009 5:42:44 PM

Okay, wally world is definitely not the lowest prices on big ticket items all the time, sometimes they are, and the fact that they are willing to price match makes them a viable option to at least research, which any consumer worth their salt or who values their money should, nay, MUST do with big ticket items anyways. 

 

That said, smaller ticket household type items can be found at pretty good prices there, not always the best but darn near most of the time unless you'd like to go to costco and get bulk which is the best way to get the cheapest price per unit, oz, liter, whatever.

 

Finally, yes, they've slashed prices but again, a consumer should do some research before purchasing, especially with the internet and high speed connections these days, you can at least compare a couple stores before walking out the door, so is a book that's a penny cheaper at wally world going to convince me to drive across town, heck no, but it's a nice gesture to the consumer even if it is backhanded. Is a flat panel TV that's $100 cheaper at wally world than costco going to get me to drive across town, probably...

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