Using Discounts as bait, Wal-Mart hooks Profits

Consumers don’t have to wait any longer for the holiday shopping season to arrive as Wal-Mart, the largest retailer in the world, have slashed down the prices by 15%-30% of more than 100 popular electronics, rearranging the Christmas and Hanukkah calendar for its clientele and competitors.

The decision to start discount early came on Friday, just after Wal-Mart reported of a low October sale and a grim November outlook.

The heavy discounts on products like televisions, laptops and cameras, which were supposed to be put after Thanksgiving Day, could start off a price war, as competitors like Target, Best Buy and Circuit City may scurry to equal the move, de-escalating the profits, especially if consumers delay buying in a hope to get higher discounts.

Including such items as Panasonic 42-inch HD plasma TVs, slashed to $1,294 from $1,794; the Polaroid LCD HDTVs, reduced to $997, from $1,297; and Cingular C139 prepaid phones, marked down to $19.97 from $29.98, Wal-Mart will continue their discount shopping season till New year.

In a release on Thursday, Wal-Mart said it intended to "reinforce Wal-Mart's price leadership position" in the toy and electronic section. The discounts on electronics follow Wal-Mart's move in mid October to cut prices on more than 100 holiday toys, which the company said is already resulting in a "significant lift in unit volume."

Over the last year, Wal-Mart had back grounded its customary ad campaign featuring a sword-wielding, price-slashing smiley face, and turned instead to sleek pitches alluring clientele to buy silk camisoles and 300 thread count sheets.

Now, the rollback (as Wal-Mart calls its price cutting) is back.

“You are going to see the reinvigoration of the rollback because that conveys value and we want to get that message across,” said Gary Severson, the senior vice president for electronics at Wal-Mart. He called the reductions so far this season “a nice one-two punch.”

Stevenson informed that the semi-retired smiley and the rollback message will juice up 4,000 Wal-Mart stores for next two months.

Initially, Wal-Mart relied on newspaper advertisements to inform the customers of discounts, but this year they have adopted a new policy, in which they will advertise the discounts in mailings to shoppers and the employees will hand out fliers in the stores directing shoppers to the cheaper toys and electronics.

Wal-Mart's same-store sales in the U.S. for the four weeks ended October 27 grew 0.5%, a figure that includes growth of a mere 0.3% at Wal-Mart Stores and 2% at Sam's Club.

Analysts surveyed by Thomson Financial expected same-store sales to rise 1.5%.

The lusterless sale is blamed on certain factors, like a failed apparel strategy and a store remodeling program that interpreted business. The company also informed that the prices were compared with last years September sales, which were high due to pre and post hurricane shopping and the comparison painted a pale picture.

“By focusing on price this holiday, Wal-Mart is putting its competitors at a real disadvantage,” said Bill Dreher, an analyst at Deutsch Bank Securities.

Wal-Mart’s rivals quickly shrugged off the move. In a statement, Target said yesterday that it would “continue to gain market share by delivering consistent merchandising excitement and compelling value to our guests.”

Brian Lucas, a spokesman for Best Buy, said, “it’s not just low prices people are looking for” when it comes to electronics like televisions, but also professional installation and strong service, areas where he believes his chain “has a big advantage.”

Wal-Mart has pivoted around discounts since decades and low prices have been its heart and soul from the time it came into existence. ‘Save More, Smile More’ has been their motto and they have lived up to it.

Wal-Mart, the American public corporation founded by Sam Walton in 1962, is the largest retailer and second largest corporation in the world, behind Exxon Mobil, based on revenue as of 2006.

It is the largest grocery retailer and toy seller in United States, with an estimated 20% of the retail grocery and consumables business and 22% of the retail toy business, having surpassed Toys "R" Us in the late 1990s.

The largest private employer in the world, Wal-Mart operates in Mexico as Walmex, in the United Kingdom as ASDA and in Japan as The Seiyu Co., Ltd.