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Wal-Mart may drive online sales with bare-bones margins

By Tim Conneally, BetaNews

November 26, 2007, 2:31 PM

Wal-Mart economics made simple: sell it cheap, sell more of it. This strategy seems to be well-received by consumers this holiday season, but may handicap the sales of higher-end competitors.

Discount retail giant Wal-Mart is driving its sales by diminishing profit margins. A random sale item pulled from walmart.com, Garmin's StreetPilot c330 Vehicle GPS Navigator, is cheaper than all competitors by a fraction. The lowest price on most comparative shopping sites is $169.00, today on Walmart.com, the item sells for $168.88. The same product on Amazon.com costs $224.95.

Price reductions like this in today's Cyber Monday sale are expected to continue through the holiday season to encourage spending from wary consumers. Loss-leading is a marketing tactic where products are offered at cheaper than cost in hopes of stimulating sales in other, more profitable areas. Due to Wal-Mart's varied selection, this tactic can be employed in numerous product categories with roughly the same effect.

Furthermore, the "ship-to-store" option offered on Walmart.com leverages the company's existing supply channel to give customers a break they might not get otherwise. The consumer is offered free shipping on items purchased on the company's Web site, provided they are delivered to the nearest brick-and-mortar Wal-Mart location rather than the customer's home address.

As a result, Wal-Mart cleverly uses online sales as a tool for bringing customers in the store; and in so doing, it blurs the line somewhat between the virtual and physical storefronts. Analysts last September estimated the ship-to-store option could be responsible for as much as one-third of its online sales.

Economists had been speculating that this will be the "worst holiday season in five years." But with margins being crushed, it seems it will be worst only on retailers who struggle to sell as cheaply as the ubiquitous Wal-Mart.

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By steinwaytony

posted Nov 26, 2007 - 4:50 PM

First of all, this comment:

"Wal-Mart has existed by selling at the lowest possible margins since they first opened their doors. This is nothing new and is definitely not a 'sign' signaling the "worst holiday season in five years".

...is plain wrong. Wal-Mart may lay claim to the smallest margins at brick-and-mortar stores, but a few small online retailers (with no storefronts) have them beat regularly. I'm actually even surprised that a random sale item was cheapest at Wal-Mart online. On books, for example, Buy.com usually wins. On electronics, Newegg is quite competitive.

One of Wal-Mart's drawbacks to their online business is shipping. IIRC, they're one of the few online retailers not to offer free shipping over $x. It seems silly, but I'd bet good money that people would pay a few percentage points more for a product that's shipped for "free."

Score: 0

By PC_Tool

posted Nov 26, 2007 - 5:59 PM

You claim he is wrong, and then argue that based on online margins? Show me in the quote you posted where it says anything about "online".

Score: 0

By alphatrigon

posted Nov 26, 2007 - 4:25 PM

I shop at Target. I prefer a cleaner and more sanitary environment when I shop. I think Walmart should raise margins to be normal like everyone else, and use that money to pay people keep their stores, inside and out, clean. Or if they already do that, make sure they do a better job.

Of course, it could just be dirty people go to walmart and crap all over the place, but that's just opinion ;)

Former Walmart employee out...hehe

Score: 0

By PhoenixPath

posted Nov 26, 2007 - 4:06 PM

For crying out loud...

Wal-Mart has existed by selling at the lowest possible margins since they first opened their doors. This is nothing new and is definitely not a "sign" signaling the "worst holiday season in five years".

What a load of fearmongering BS.

Hate to break it to ya, but the economy isn't in the toilet, the margins aren't any lower than normal, and the holiday season is looking pretty damned good so far.

Score: 0

By sjc001

edited Nov 26, 2007 - 5:26 PM

When it comes to the vast majority of Americans it is, in fact, in the toilet. Most gains are no longer translating down to the average American because of such things as excessive outsourcing and the like. You haven't heard, but many Americans are planning on spending less this year than last because the economy and dollar are so low. Its time you got your head out of the sand and actually had a good look around.

Score: 0

By PhoenixPath

posted Nov 27, 2007 - 1:10 PM

"When it comes to the vast majority of Americans it is, in fact, in the toilet."

We're not even in a recession, much less "in the toilet".

If anyone is planning on spending less it is either because they are planning on saving more or have fallen for the liberal BS you're shoveling.

Every quarter this year has posted a gain. Sure, it's slowing, but slower gains do not equal "in the toilet"...unless of course, you have some bias that makes you want to believe it so much you are completely willing to ignore things like facts.

Score: 0

By PC_Tool

posted Nov 26, 2007 - 5:58 PM

lmao...

Economy is busting right now. Where are you getting your information?

As for the dollar being low, again, this is planned and is actually helping to boost the economy (trade, import/export, etc).

Of course, I wouldn't expect an arm-chair "commie" economist such as yourself to understand such concepts.

Score: 0

By sjc001

posted Nov 26, 2007 - 7:06 PM

Well, if it isn't the economic sociopath tool again. [rolleyes]

Of course its planned, you cretin. But its planned to only benefit a few at the top mostly, not the average American.

As for the dollar? Is that why many countries are moving over to the Euro now. ;-)

BTW. I get my info from the real world. You should try to visit it some time soon...

Score: 0

By PC_Tool

edited Nov 27, 2007 - 12:27 AM

Is that why many countries are moving over to the Euro now.

Your definition of "many" could use some work...

But its planned to only benefit a few at the top mostly

Ahhh... Always nice to see your conspiracy theories. Too bad it's all in your mind. It'd be an exciting place, I'm sure.

I get my info from the real world. You should try to visit it some time soon...

Right. Liberal Media. Unfortunately, they *do* exist in the real world. Pity they wouldn't know an unbiased fact if it painted itself purple and danced naked on top of a harpsichord singing "Unbiased Facts Are Here Again."

You, sjc001, have the critical thinking capacity of a turnip. Enjoy your delusions.

FYI: The US has not experienced a *single* down quarter this year. A recession is defined as multiple back to back down quarters.

If our economy is in such dire straits, how is it we're not even in the beginnings of a recession and most economists are still saying we probably won't see one at all (or that if we do, it will be exceedingly mild)?

Oh, that's right....it's because you don't have a clue what you're talking about. Does believing we're on the verge of collapse make you feel better about living in America's Hat?

Score: 0

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