Wal-Mart starts the discounting early this year
Posted by: in Companies Competitive StrategyFiled under: Industry, Consumer experience, Competitive strategy, Wal-Mart (WMT), Circuit City Stores (CC), Sears Holdings (SHLD)
One sign the snow is coming is that retailers begin their marketing for the holidays. In a bad economy the discount signs are coming early this year. It is time to break out the salt. The ice is already on the driveway and the front walk.
According to The Wall Street Journal, “Wal-Mart Stores, Inc. (NYSE: WMT) stated it will cut prices on some of the most popular toys and speed up the opening of Christmas shops in its stores nationwide as it tries to lure budget-conscious shoppers and jump start its biggest selling season.”
The news can hardly be good for most other large, national retailers. Discounts mean lower margins and discounts early in the season mean pressure on earnings for the fourth quarter. Wal-Mart has the balance sheet and cashflow to support price cuts. That might not be true of some other store operators.
The move by Wal-Mart puts pressure on much less healthy retailers like Sears (NYSE:SHLD) and Circuit City (NYSE:CC). In a credit crisis financing inventory will be hard and in some cases impossible. How may banks want to give a failing firm like Circuit City credit to purchase TVs and PCs for the holidays? Not many.
Wal-Mart’s move may speed up the inevitable. Some retailers won’t be around to greet Santa.
Douglas A. McIntyre is an editor at 24/7 Wall St.
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