The National Retail Federation is projecting sales will grow four percent during the upcoming Christmas holiday sales period but that retailers should expect to battle for every sale they get as a variety of economic conditions, including a slumping housing market, high energy costs and other factors, cause a wide percentage of the population to spend more judiciously than in the recent past.
Wal-Mart as it has done before is seeking to gain an early edge moving into the holidays by announcing a broad price rollback. Last year, the retailer focused on toys and consumer electronics to make a statement. This year, that statement has become broader with price reductions to include other categories such as grocery, home and apparel.
According to Wal-Mart, it has cut prices on 15,000 items or 20 percent more than at this point last year.
| Items on Wal-Mart's Price Rollback List | |
• Fisher Price Learning Kitchen – was $64.88, now $54.88 |
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| • Assorted "Be Bratz" Dolls – was $29.94, now $19.93 | |
| • Fisher Price Smart Cycle – was $99.88, now $89.88 | |
| • Havoc Heli – was $29.97, now $24.74 | |
| • Motts Applejuice – 2 for $3 | |
| • Duncan Hines Box Brownies (19.8-21 oz.) – 2 for $2 | |
| • Hillshire Farm Cocktail Smokies – 2 for $5 | |
| • Progresso Soups – 2 for $3 | |
| • Hershey’s Baking Pieces (8-12 oz.) – 2 for $3 | |
| • Hanes Ladies Fleece Crew top or pants – $5 each | |
| • Hanes Boys and Girls top or pants – 2 for $9 | |
| • Black & Decker 12 Cup Digital Coffee Maker - was $29.92, now $24.96 | |
| • Black & Decker 4-slice toaster – was $29.97, now $24.88 | |
| • GE 1.1 cubic foot microwave – was $64.72, now $59.96 | |
| Source: Wal-Mart Stores, Inc. | |
"In an effort to help stretch the dollar, we're giving customers an early start on holiday savings with even more targeted price cuts to come," said Bill Simon, executive vice president and chief operating officer, Wal-Mart. "These rollbacks are just the start of special values we'll unveil now through December to remind people that our prices will remain unbeatable and you will save money on great products here."
While the chain is counting on price reductions on key items to increase customer traffic, retail observers say Wal-Mart will need to find ways to protect margins at the same time.
Charles Grom, an analyst with JP Morgan, told Reuters, "At the end of the day I'm a little bit concerned that this sounds great, but you only make money on these programs if you can get the volume throughput to keep the gross profit margin dollars; and I'm not so sure they can."
Interestingly, while Wal-Mart was going public with prices on a number of its rollback items (see chart), the company was threatening legal action against websites that in the past have posted sale prices before the retailer's ads hit.
The law firm of Baker Hostetler, which represents Wal-Mart, has sent a notice to operators of websites including Gottadeal.com and Dealtaker.com, which read: "It has recently come to our attention that you and/or your company may potentially obtain possession of and untimely release Wal-Mart's sales circulars, advertisements or other information prior to their authorized release dates. To the extent that the methods of acquisition or use include criminal activity, criminal penalties may also apply."
John Simley, spokesman for Wal-Mart, said the retailer is focused on stopping the leakage at all levels.
"We have tried other methods with inadequate results," he told CNNMoney.com. "We believe that the unauthorized distribution of [Wal-Mart ads and circulars] is a violation of our legal rights. This needs to be respected."
Brad Olson, the founder of Gottadeal.com, said, "I don't understand why they would do it... Every year Wal-Mart's ad is the most anticipated one on our site. We get 2 million clicks on the ad between October and November. This is great publicity for Wal-Mart."
Discussion Questions: Will this holiday season be more price competitive than previous years? Will Wal-Mart gain an advantage from its early start? Does the chain appear to have altered its approach any from last year? Is the company helping or hampering its efforts by threatening legal action against sites that publish prices before they officially go public?