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In 2003 the Wall Street Journal reports that a survey conducted by Banc of America Securities found that Wal-Marts prices of 15 popular toys were 12 percent lower than those of Toys R Us the largest stand-alone toy retailer and 8 percent lower than prices 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 deep in 2003 It is for the market share Before 2003 Wal-Mart was No2 toy retailer After winning the toy price war in 2003 Wal-Mart became the No1 toy retailer On the day after Thanksgiving Wal-Mart reported the largest single-day sales totals ever 152 billion Obviously the price strategy in the 2003 holiday season is Penetration pricing 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 breaking down existing brand loyalties Penetration pricing is most commonly associated with a marketing objective of increasing market share or sales volume rather than short- term profit maximization For instance it is charging 2974 for the Hot Wheels T-Wrecks Play Set which has a wholesale price of 42 and 1946 for the Sesame 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 put tremendous downward pressure on toy prices and gave a big hit on the other toy retailer Because of the thread of Wal-Marts lower price Toys R Us the national leading toy retailer would close 75 Toys
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