Wal-Mart Stores (NYSE:WMT) has a new strategy to take on Amazon (NASDAQ:AMZN): Enter (more) discounts. 24/7 Wall St. reported Sunday that the big box retailer has started offering a number of large discounts on consumer electronics, and the company’s executives are hoping that the price cuts will help drive stronger sales, ultimately resulting in more encouraging earnings.
Wal-Mart has been suffering disappointing quarters for a while now, and investors are beginning to show an uneasiness for the flattened demand that continues to confront the retailer. Now that Wal-Mart’s shares are down 1.8 percent this year, the Bentonville, Arkansas-based company has no choice but to continue to drop its prices. However, with online competitor Amazon always much too eager to match those discounts, Wal-Mart’s new prices could all be for naught.
But despite the risk, Wal-Mart is still going for it. According to 24/7 Wall St., Wal-Mart’s latest promotions drop the prices on TVs, laptop, tablets, and cellphones. Most of the deals are for brands from companies that have been performing poorly in terms of sales — think Hewlett-Packard (NYSE:HPQ) — and some consumer electronics prices are dropping dramatically. 24/7 Wall St. highlighted the example of VIZIO SmartLEP 55-inch televisions going for $698 and home theaters seeing prices as low as $278.
Some of the new discounts are absurd, but they’re also tailored to appeal directly to traditional Wal-Mart shoppers — people who have low incomes and are especially cost conscious. Though in the past they might not have even considered investing in certain electronics, Wal-Mart’s new prices may be able to entice them, and that’s where the big box retailer could make big sales.
Wal-Mart and Best Buy (NYSE:BBY) now compete with each other and especially with Amazon, because the online retail giant gets away with the best prices in the game, often offers same-day or free shipping, and has a host of loyal customers.
Amazon is famous for squeezing out its competition, and that’s certainly what the Seattle-based company is doing to the brick-and-mortar retailers. The problem with Amazon that 24/7 Wall St. points out is that it gets away with not only offering low prices but also bundling its products as a packaged deal, thus making greater sales than it would otherwise. Amazon’s Kindle HDX 7-inch tablet sells for as little as $229, and then Amazon uses the device to sell other products and services, including the ever-popular Amazon Prime.
Wal-Mart has no choice but to beef up its online offerings and also continue to drop prices. The company needs to make sure that its disappointing U.S. revenue doesn’t cause investors to lose interest, and it also needs to stave off Amazon from eating away any more market space. With Best Buy, Target (NYSE:TGT), and Amazon constantly on its back, Wal-Mart really has no wiggle room, and the company’s executives are hoping the latest discounts will at least set it apart from the crowd.