Walmart announces price cuts for holidays

October 22, 2009 12:37:32 AM PDT
If you're looking for bargains this holiday shopping season, there may be some very good deals, thanks in part to an aggressive strategy by Walmart. The world's largest retailer is promising rotating cuts on thousands of items, but will this strategy actually lure shoppers to spend more?

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The price cuts started on Wednesday and will accelerate as Christmas gets closer. Other retailers are trying to keep up with Walmart, creating major competition just in time for the holidays.

Walmart is at it again, and what better time for it to make its move than just before the holidays. The world's largest retailer says it's cutting prices this season on thousands of items. Ground beef, for instance, is now $1.25 per pound -- a 26 percent savings. Bananas are 39 cents a pound -- a 27 percent savings. And select board games are $15 with a savings of up to 25 percent.

"I think the hope is that the buzz will get to a broader array of consumers," says Kathleen Kusek, a consumer researcher.

Unlike most retailers, Walmart has actually increased sales and profits since the recession began, but Kusek says the company is now positioning itself to attract even more customers.

"Consumers that haven't considered Walmart before, or maybe had negative connotations of Wal-Mart, but now that they're feeling it a lit bit more in the pocketbook, they're willing to give it an experience," says Kusek.

The price cutting actually started last week when Walmart announced that its website would charge just $10 for upcoming hardcover releases. The move started a price war when Amazon and Target.com said they too would be slashing book prices.

"Nobody wants to be left out. And these are the three big players, Walmart, Target and Amazon. And everybody knows that price perception is really important in retailing and they all try to offer good prices," says Santa Clara University Professor Kirthi Kalyanam, Ph.D.

Toys R Us, meanwhile, is trying a different tactic. The company has brought back layaway, a payment program made popular decades ago, which allows shoppers to pick out gifts early and make payments over time. So far, it seems to be working. Hearing about the layaway plan is why some shoppers came into the store.

"The economy is bad right now. Parents still want to provide Christmas for their kids, so I mean why not?" says a shopper.

According to a survey by the National Retail Federation, shoppers plan to spend about three percent less this holiday season, and more than 40 percent said discounts will be the most important factor in where they shop.

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