Walmart Strikes First; Will Price War Follow?

by Sarah Mahoney, Oct 24, 2011, 2:34 PM

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Walmart says it is offering something new for the holidays: A Christmas Price Guarantee. That aggressive price-matching promise may be a sign that Holiday 2011 will be even more of a slugfest than initially forecast.

“Walmart is trying to give customers assurances that they don't need to wait to shop later in the season to get better deals -- a strategy to move sales forward in the season,” Doug Hart, partner in the retail and consumer product practice at BDO USA, tells Marketing Daily. “It may be trying to replicate its strategy of 2008, when it was able to take market share by discounting aggressively early in the season. “

Still, he says, that doesn't necessarily mean the Bentonville, Ark.-based retailer, which is battling a two-year sales slump in the U.S., is willing to take off the gloves quite yet.  “It's too early to tell whether this is the start of a price war. Some competitors may view this as Walmart's efforts to neutralize them in a price war, and it is unclear how they will react.

The pricematch applies to any product purchased between Nov. 1 and Dec. 25. If a customer finds it advertised for less at another store, Walmart will give the customer a gift card for the difference through Dec. 25. (Internet ads and Black Friday deals are excluded.) “The greatest gift we can give our customers this holiday is great low prices on the things they want most,” Duncan Mac Naughton, Walmart's chief merchandising officer, says in its release. “Walmart is easing shopping stress this Christmas by allowing customers to shop when and how they want, all while guaranteeing low prices through the entire holiday season.”

Retailing experts say one reason Walmart is emphasizing its price positioning is that more and more, it is losing customers to low-cost channels such as dollar stores, as well as higher-priced ones, including department stores. Its recent decision to promote its layaway options, for example, “was a competitive move, reaching a core target market with an offer that is important. We are definitely seeing an increase of Walmart shoppers crossing into dollar channels. That is who Walmart is trying to reach,” said Mary Brett Whitfield, SVP/Kantar Retailing, in a recent webinar.

And in another indication that all retailers may be making greater price cuts to win holiday shoppers, Shop.org, the online unit of the National Retail Federation, says 92.5% of online retailers plan to offer free-shipping promotions, and 31.4% of those surveyed say they will start those promotions earlier. And 56.3% say their budget for free shipping promotions is “somewhat or significantly higher than last year.”

Sears, for example, just announced it will offer free shipping on orders of $99 or more starting Oct. 30; online shoppers at its Kmart unit get free shipping on anything more than $49.

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