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Pricing Strategies - Wal-Mart

In Case 5, you will learn that lowering prices is often used to increase sales. You will also learn that when prices are lowered the company lowering its prices needs to make sure that company does NOT drive competitors out of business (predatory 'predatory'). Studying "P", Price, conclude our examination of the 4 "P's."

Of the Four P's of marketing, Price is often thought to be the easiest to use but only used when costs justify the changes in prices. Price is the most flexible of the four P's of the marketing mix. It can be adjusted to increase sales or to fight competitors, but it should be used with caution because it is easily replicated by competitors that share similar cost advantages.

Please read and think about the CASE question:

Should Wal-mart use loss leader pricing?

I am required to compose a 3 page response to this question. The response must include an Introduction, Body, and Conclusion.

Thanks in advance for your time and assistance.


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Wal-Mart doesn't plan to toy much with prices ; Last year's cuts hurt other retailers and left giant thinking it slashed too much; [FINAL Edition]
Lorrie Grant. USA TODAY. McLean, Va.: Oct 11, 2004. pg. B.8

Toy retailing is likely to bring joy to more than children this holiday shopping season.
Wal-Mart, No. 1 seller of toys and the industry's price leader, is expected to cut competitors some slack by not maintaining such cut-throat pricing as last year.
Its aggressive "loss leader" pricing on popular toys last year lured millions of consumers from traditional toy stores. While it recouped some of the margins from sales of other products in its massive selection, stalwarts Toys R Us, KB Toys and FAO Schwarz were critically wounded. Now it believes it doesn't need to cut as much.
"Wal-Mart felt they left money on the table by cutting prices deeper than they needed to in order to get the sale," says Sean McGowan, analyst at Harris Nesbitt. "So this year, while they will be the lowest priced and very promotional, they may, for example, is only a $1 less than Toys R Us rather than $5 less on some items."
The Bentonville, Ark.-based discount giant declined comment beyond affirming its commitment to its "everyday low prices."
"We will continue to focus on bringing value to our customers throughout the entire store," spokeswoman Sharon Weber says.
Half of all toy sales take place during the holiday. The industry is expected to finish flat to slightly down this year at about $20 billion for traditional toys and an additional $5 billion for video games.
So Wayne, N.J.-based Toys R Us, the second-biggest toy seller, can only hope for easing price rivalry. It took a drubbing last year from Wal-Mart and rival discounter Target (whose heavy toy promotions to carve out a place in the business helped push WalMart's pricing strategy).
Toys R Us recently announced that it may leave the toy business if its prospects don't improve. On the heels of shuttering its Kids R Us stores and educational toy chain I imaginaries, the chain now is using sharp discounts to thin excess inventory. And it has already begun its holiday appeal with newspaper inserts advertising new items, discounts and gift cards.
"We'll have great products, lots of exclusives, fantastic value and a great store experience," says Ray Arthur, CFO of Toys R Us.
That enthusiasm must infect consumers if Toys R Us, the last specialty toy retailer standing firm, is to remain.
Former contender FAO Schwarz (parent of Zany Brainy) buckled under the pricing pressure from discount chains and liquidated as last holiday season ended. KB Toys operates significantly fewer stores now under bankruptcy ...

Solution Summary

This solution discusses various pricing strategies used at WalMart.