Walmart Stores Raise Toy Prices for Christmas -- Surprised?

Posted Dec 16th 2010 12:00PM by Mark Fightmaster
Filed under: Competitive Strategy, Wal-Mart (WMT), Target Corp. (TGT)

Walmart (WMT) Perhaps it is the cynic in me, but I was not surprised to read this story about Wal-Mart Stores Inc. (WMT) from Bloomberg. The news outlet obtained an e-mail that was sent to Walmart managers instructing them to raise prices on an average of 1,800 types of toys per store. The managers were instructed to perform the price markups "as soon as possible" and were told that the price changes were "to better enable your store and the company to have a successful financial month."

Walmart stated that these price increases went into effect because temporary discounts on products (including toys) ended on November 30. Spokesman Ravi Jariwala, spokesman for Walmart, said in an e-mail, "Once a rollback ends, the item returns to its original everyday low price." That said, Eric Johnson director of the Center for Digital Strategies at the Tuck School of Business at Dartmouth noted that "In previous years Wal-Mart has come out and hammered everyone with unbelievably low toy prices ... They stepped away from that this year and after Thanksgiving their prices have crept back up."

The company did note that it will unleash a new round of toy discounts on the night of December 17. Nevertheless, I can imagine that there are some Christmas shoppers who shopped around for the best price and may have ventured to one of Walmart's competitors to purchase a lower-priced toy. There is a chance that Walmart's strategy of overinundating its stores with floor space dedicated to toys, taking over the area that used to be earmarked for garden products and renaming it "Toyland." Unfortunately, this step (along with expansion of the pages in the company's toy brochure) has not helped the retailer stop from losing market share to the likes of Target (TGT) and Toys R Us.

Finally, I feel a sense of duty to raise a conspiracy theory. The article is quick to point out that Walmart's CEO Mike Duke predicted in October that same-store sales in its U.S. stores open at least a year will increase during the current quarter. Such performance would put an end to six straight quarterly drops in same-store sales. Perhaps the decision to raise the prices on toys was a move of desperation to give sales a final push and bring Duke's prediction to fruition. Of course, we know that no one would do that -- right?

Tags: Christmas shopping, Eric Johnson, featured, holiday shopping, inthenews, Mike Duke, quarterly sales, Ravi Jariwala, retail, Target, toy sales, toys, Toys R Us, Wal-Mart, Walmart, Walmart discounts, Walmart prices, Walmart sales, Walmart toy prices, WMT