Wal-Mart's Price Strategy

In 2003, the Wall Street Journal reports that a survey conducted by Banc of America Securities found that Wal-Marts scathes of 15 popular toys were 12 pct embarrasseder than those of Toys R Us, the largest stand-alone toy retailer, and 8 per centum freeze off than damages at discount retailer Target, the nations No. 2 general retailer after Wal-Mart.

The Journal says that Toys R Us executives have acknowledged that the Wal-Mart price cutting has caught them somewhat by surprise and was among factors hurting its recently reported third-quarter results.

Why Wal-Mart, the worlds largest retailer, cuts toys prices so latterly in 2003?

It is for the securities industry share. Before 2003, Wal-Mart was No.2 toy retailer. After winsome the toy price war in 2003, Wal-Mart became the No.1 toy retailer. On the day after Thanksgiving, Wal-Mart reported the largest single-day sales totals ever, $1.52 billion. Obviously the price strategy in the 2003 holiday season is Penetration determine.

Penetration pricing is the pricing technique of setting a relatively low initial entry price, a price that is often lower than the eventual market price. The expectation is that the initial low price will secure market acceptance by severance down existing brand loyalties. Penetration pricing is most(prenominal) commonly associated with a marketing objective of increasing market share or sales volume, rather than short- term benefit maximization.

For instance, it is charging $29.74 for the Hot Wheels T-Wrecks Play Set, which has a wholesale price of $42, and $19.46 for the benni Street Hokey Pokey Elmo, whose wholesale price is $24. By employing an extremely competitive pricing strategy Wal-Mart became the largest toys and games retailer in 2003.

Wal-Marts aggressive pricing policy, particularly in traditional toys and games redact tremendous downward pressure on toy prices and gave a big hit on the other toy retailer. Because...

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