11/23/2010

Wal-Marts Strategic Move for Black Friday

Wal-Mart recently announced that it will be matching its competitors’ Black Friday Ads.
I think this strategic move by Wal-Mart is very smart and economically beneficial. The move will increase the amount of shoppers who enter Wal-Mart over the holidays. Even if most shoppers are only at the store for a price-match, Wal-Mart will benefit from the additional foot-traffic, and they must feel that they will make up any losses occurred through price-matching with an increase in the number of shoppers coming into their stores. This strategic move by Wal-Mart will insure control of much of the market during this busy holiday shopping season. So far, Wall Street seems to like the decision made by Wal-Mart as referenced in a steady increase in stock price since the announcement of the strategy.

6 comments:

Jedora Rules said...

Does Wal-mart actually need more sales on Black Friday? Surely, they don't need more people in their stores. Their stores are packed the day after Thanksgiving, and now they will be even more crowded. Throw strategic pricing out the door if your competition is just going to copy you.
On one hand, the move is brilliant, on the other, this move exemplifies why some people despise Wal-Mart.

delta said...

I think that it would be interesting to see some competitors to Wal-Mart (if there are any) offer the same incentive. I have never heard of a store offering to match Wal-Mart prices. Perhaps this move is too risky based on the fact that Wal-Mart typically gets lower prices on the goods they stock. But on the flip side maybe the consumer will purchase other items to offset the loses.

walla walla said...

It’s all about producer surplus. What Wal-Mart is really doing is increasing their clientele by attracting those who otherwise would not come to their store with prices they can’t afford to bypass. With their aggressive price-matching, Wal-Mart is able to capture more sales and by so doing, is eliminating their deadweight losses.

Baden said...

Yes Jedora Rules, Wal-Mart wants more sales on Black Friday and every other day for that matter just like every other retailer. For anyone that doesn’t like the idea of Wal-Mart matching other businesses prices I would ask why? Wal-Mart isn’t as bad as everyone thinks. They actually pay higher wages than comparable jobs offered by “mom and pop” stores in the area. Their volume benefits consumers by having more up to date and fresh products. This is especially noticeable in their fruit and vegetable products which due to their quick turnover last longer after purchase than most other grocery stores fresh produce. One more thing, most businesses will only hire part time employees for comparable jobs that Wal-Mart is willing to hire someone full time. This helps not only the employment market but also the individual employed who then qualifies for benefits such as heath insurance if they choose, and it is good to have choices as a full time employee that aren’t available to part time employees. There are arguments against Wal-Mart but lets be objective and look at how their efficiency and productivity benefit individuals and our society too. I agree that Wal-Mart’s Black Friday matching prices strategy has its risk but Wal-Mart is responsible to manage those risks.

Jedora Rules said...

Baden,
I know they want more sales, but do they need them. If you watch the news, Black Friday is a joke. People trampling people to save $10. People camping overnight for a free DVD player. I am not questioning whether Walmart wants the sales, but they are already the low price leader. There is a certain point where it just becomes dangerous to shop at Walmart. Maximum Capacity comes to mind.

Dave said...

-1 on Delta for spelling.

This is interesting. I'm working backwards through the posts, so I just commented about Black Friday strategy choices and outcomes.

What Wal-Mart is really doing is guaranteeing that both they and their competitors will not be at the best outcome in the prisoners' dilemma game underlying product pricing. This is a good strategy choice for a big firm with deep pockets.