The holiday wars are on, and it looks like Wal-Mart is fighting online rivals. The company is experimenting with matching prices, a move that could cut profit during a critical earning season.
The Wall Street Journal had this story by Shelly Banjo:
Wal-Mart Stores Inc. is testing a program to match online prices from rivals such asAmazon.com Inc. this holiday season, a move that could make the discounter more competitive but cut into earnings.
Wal-Mart executives are discussing whether to go ahead with the price-matching program, which would expand its one for local brick-and-mortar competitors, according to spokeswoman Deisha Barnett. Under consideration is how much Wal-Mart might lose if the program were to go nationwide, people familiar with the matter said.
Ms. Barnett said the company’s focus is on taking care of customers and said store managers have had discretion to match certain online prices for customers for some time.
Wal-Mart has long resisted matching online prices, even as competitors Best Buy Co. and Target Corp. adopted the practice to keep customers from “showrooming,” or browsing brick-and-mortar stores but subsequently making the purchases at online competitors.
The New York Post story by James Covert said that store manager have always been able to match other stores’ prices, but online was new territory for them:
Walmart is looking to knock Jeff Bezos down a peg.
The discounter is weighing a plan to match the prices at big online competitors, including Bezos’ Amazon.
Walmart has long had a policy of letting store managers match prices of local brick-and-mortar competitors, company spokesman John Forrest Ales noted.
This summer, Walmart rolled out its “Savings Catcher” app, which automates the process for shoppers, allowing them to scan their receipts to find lower advertised prices nearby.
This holiday season, those programs may begin taking prices at online retailers into account as well, according to people close to the situation.
“We’re listening to our customers, and they can count on us to remain the everyday low price leader,” Ales told The Post.
Anne D’Innocenzio wrote for the Associated Press (via The Huffington Post) that sales at the nation’s largest retailer have been lagging and this could help get them going:
Wal-Mart is trying to rev up sluggish sales in the U.S. as it battles competition from online retailers, dollar stores and drugstores. At the same time, it’s also dealing with a slowly recovering economy that hasn’t benefited its low-income shoppers. As a result, Wal-Mart’s U.S. namesake stores, which account for 60 percent of its total business, haven’t reported growth in a key sales measure in six straight quarters.
But matching prices from sellers that don’t have the costs associated with running brick-and-mortar stores could also hurt profits.
Wal-Mart’s move underscores how stores are being forced to step up their game for the holiday shopping season, which accounts for about 20 percent of retail industry’s annual sales. The National Retail Federation, the nation’s largest retail trade group, forecasts a 4.1 percent sales increase to $616.9 billion for November and December from last year. But online sales, which are included in the forecast, are expected to increase anywhere from 8 percent to 11 percent.
Overall, stores need to ply shoppers with deals and free shipping to win their money. Target Corp. announced this month that it’s offering free shipping on all items for the holiday season until Dec. 20.
As for Wal-Mart’s price-matching policy, Deisha Barnett, a Wal-Mart spokeswoman, says many store managers have matched online prices for customers on a case-by-case basis.
Bloomberg’s Matt Townsend reported that matching online prices isn’t the only thing Wal-Mart is doing. The retailer is cutting prices and increasing customer service, all moves that could be costly:
Wal-Mart Stores Inc. (WMT:US), working to reverse six straight quarters of stagnant U.S. sales, will cut prices on more than 20,000 items tomorrow to get a jump on competitors before the holiday season.
To improve customer service, the world’s largest retailer plans to open more checkout lines during peak shopping times, executives said on a conference call yesterday. Wal-Mart is also considering matching in-store prices with online competitors if a customer asks, they said.
Wal-Mart is entering a crucial holiday season under Chief Executive Officer Doug McMillon, who took the helm in February. The chain cut its full-year sales forecast this month as McMillon acknowledged it needed to do a better job stocking shelves and staffing stores, two staples of retail.
Reuters said in a story by Nathan Layne that spending is likely to be up this holiday season, but people are still looking for bargains:
The moves come ahead of what is expected to be a fiercely competitive year-end season. Research firm Customer Growth Partners (CGP) predicts spending will rise 3.4 percent, up slightly from last year’s 2.9 percent growth, which was the slowest growth since 2009.
“Demand is sluggish and consumers of all stripes are looking for value,” said Craig Johnson, president of CGP. “This is going to be a pretty promotional Christmas.”
However, Johnson said he expects Wal-Mart to return to same-store sales growth in its fiscal fourth quarter, helped by food inflation, strong demand for consumer electronics and a move to put labor back in stores to address long checkout lines and better stock shelves.
Wal-Mart said it planned to hire 60,000 additional workers for the holidays, up 10 percent from last year, and would aim to have all of its cash registers open during peak hours.
The nation’s largest retailer is struggling to increase sales and remain competitive during the busiest shopping season of the year. And it is obviously feeling the pressure, since it is extending price matching to include online retailers. Retailers continue to fight for wallet share, but in reality, people will spend money.
