Wal-Mart Stores Inc is taking its ferocious price cutting into new markets as the economy shows hints of recovery. In the past year, the discount behemoth has been more focused on markdowns for necessities such as food that drove sales in the downturn. But now its aggressive strategy is spreading rapidly to other goods being sold online as well as in the company's stores.
In the past month, Wal-Mart has started selling more than 100 toys for $10 each and rolled out nationally a wireless service priced well below competitors. This Thursday, Walmart.com cut prices on 10 yet-to-be- released hardcover books to $10 each, igniting a price war with online giant Amazon.com.
After both online retailers then cut their prices on those highly anticipated books to $9 each, late on Friday Walmart.com shaved a penny off that price and was selling titles such as Sarah Palin's "Going Rogue: An American Life" for $8.99 each -- discounts of nearly 60 percent or more off the cover price.
Prices could fall further. Walmart.com said it would adjust its pricing as needed to ensure it offered the lowest prices on its top 10 pre-selling books. The moves show Wal-Mart is seeking new areas to dominate after more than a year during which the world's largest retailer benefited from selling low-priced food and medicine.
"Clearly they are more aggressive and they will cede no ground to the competition, whether it's the Best Buy's of the world, or Toys "R" Us or ... Amazon," said Craig Johnson, president of Customer Growth Partners. "Any competitor that underestimates Wal-Mart, does so at its own peril."
While Wal-Mart is testing the mettle of its competitors, it also faces a test of its own -- showing the upgrades it is making to its U.S. business can help it retain newly won market share even after the economy improves.
Wal-Mart is holding an analyst meeting Oct. 21 and 22 and Wall Street wants to hear how its sales performed in August and September, when many retailers noted improving trends.
"Given sequential up-ticks in traffic at peers Costco and Target as well as department store retailer Kohl's during August/September, the question looms whether Wal-Mart saw similar gains or donated share," wrote JP Morgan analyst Charles Grom in a research note.
Comments