By Shelly Banjo
Wal-Mart Stores Inc. is testing a program to match online prices
from rivals such as Amazon.com Inc. this holiday season, a move
that could make the discounter more competitive but cut into
earnings.
Wal-Mart executives are discussing whether to go ahead with the
price-matching program, which would expand its one for local
brick-and-mortar competitors, according to spokeswoman Deisha
Barnett. Under consideration is how much Wal-Mart might lose if the
program were to go nationwide, people familiar with the matter
said.
Ms. Barnett said the company's focus is on taking care of
customers and said store managers have had discretion to match
certain online prices for customers for some time.
Wal-Mart has long resisted matching online prices, even as
competitors Best Buy Co. and Target Corp. adopted the practice to
keep customers from "showrooming," or browsing brick-and-mortar
stores but subsequently making the purchases at online
competitors.
But Wal-Mart is fighting to keep shoppers coming to its stores
and to regain its reputation as a low-price leader, which faded in
recent years as dollar stores and online competitors became more
aggressive. A basket of goods at Wal-Mart was 1.2% cheaper than the
same items at Target, the smallest price gap since 2012, according
to a June study by consulting firm Kantar Retail.
Gearing up for the holidays, Wal-Mart said it would eliminate
shipping fees and guarantee delivery by Christmas Eve for 100
popular products including Disney Frozen toys and Lego products,
but wouldn't drop shipping fees entirely.
On Saturday, the retailer kicks off its holiday discounts in
stores on 20,000 products like the Xbox One. On Monday, it plans to
pull forward 15 online "Black Friday" specials on products such as
an Element 40-inch HDTV and NutriNinja Pro Blender.
"As soon as they put away their Halloween costumes, our
customers start prepping for Thanksgiving, buying Christmas trees
and shopping for gifts, " said Wal-Mart U.S. chief merchant Duncan
Mac Naughton.
Losing its pricing edge makes it more difficult for Wal-Mart to
draw customers based solely on price, according to Laura Kennedy,
who conducted the Kantar study.
Online, Wal-Mart has become more competitive with Amazon,
according to research from Wells Fargo and pricing firm 360pi. In
the three months through February, Wal-Mart's prices were on par
with Amazon's. In August, Wal-Mart's prices dropped to nearly 10%
lower than those of Amazon, where prices have been increasing, the
research found.
Price matching comes at a cost but can boost a retailer's
reputation. At Best Buy, the program resulted in a hit to margins,
according to Janney Montgomery Scott LLC analyst David Strasser,
who said the move was ultimately smart because it "put a stake in
the ground that it was a serious competitor to Amazon and other
online retailers."
Best Buy Chief Executive Hubert Joly last year said he thought
the cost of price matching eventually would come down as the gap
between prices in stores and online narrowed.
The stakes are set to rise ahead of the holiday shopping season,
when retailers rake in more than a fifth of their sales for the
year. Target announced recently that it would eliminate shipping
fees for all online orders from Oct. 22 through Dec. 22, while
Amazon announced early access to holiday deals for its Prime
members.
Online shopping is expected to snag a greater share of holiday
budgets. Consumers plan to do more than 44% of their holiday
shopping online this year, up from 31% in 2009, according to the
National Retail Federation.
Wal-Mart is struggling to attract shoppers to its supercenters.
The retailer hasn't booked sales growth in the U.S., excluding new
or closed stores, since 2012. The company is investing heavily in
e-commerce and smaller, conveniently located stores. It also is
trying to reclaim its pricing advantage.
To that end, in April it rolled out an online and mobile tool
called Savings Catcher, which analyzes shopper's receipts and
refunds price differences found between Wal-Mart's prices and those
of local competitors.
"We're doubling down to make sure that we show price gaps across
the marketplace," Mr. Mac Naughton told investors recently, noting
that nearly 3% of receipts are now submitted through the Savings
Catcher tool.
The tool gives Wal-Mart greater visibility into how its prices
compare with rivals. Armed with that information, analysts say
Wal-Mart can better pressure suppliers for lower prices.
Separately, in Japan Wal-Mart said it plans to close 30
underperforming stores and remodel 50 others as it aims to reclaim
sales growth in what has been a difficult market for the retailer.
Wal-Mart entered Japan in 2002 and operates 434 locations in the
country. It will also increase its capacity for online grocery home
delivery in Tokyo, where demand for the service is growing.
Write to Shelly Banjo at shelly.banjo@wsj.com
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