Wal-Mart Will Extend Discounts; Can Target and Amazon Follow?

In an unexpected announcement this morning, Wal-Mart (NYSE:WMT) said it plans to extend its holiday season discounts beyond December 25th. The world’s largest retailer plans to offer a $50 Wal-Mart gift card to buyers of an Xbox 360 Arcade; to drop the price of an eMachines netbook to $228; and to offer up to 50% off on “hundreds of home holiday items and toys.”

The promotion begins December 26th and includes extending other discounts such as selected Blu-ray movies for less than $20. If the pre-Christmas flurry of discount press releases is any guide, it should not be long now before either Target (NYSE:TGT) or Amazon (NASDAQ:AMZN) or both follow suit.

But will they? Amazon has been on a real run this year and has matched Wal-Mart tit-for-tat on previous price drops. So has Target.

This latest move by Wal-Mart, though, may be tougher to follow. Many of the “home holiday items” that Wal-Mart plans to discount are essentially the same as items that are discounted every year after Christmas: wrapping paper, ribbon, decorations, etc. Discounts and gift card promotions on the Xbox and the netbook may be harder to meet.

The really big news for Wal-Mart, though, is its continuing push into online sales. The company’s website, which was virtually dormant a year ago, is now among the 40 most visited sites on the web. Amazon is among the top 20, but Wal-Mart’s bricks-and-mortar presence in over 4,000 retail stores is a huge plus.

Target, which also has thousands of retail outlets, does not have Wal-Mart’s web presence. Amazon, with more than double Wal-Mart’s web visits, does not have the physical presence. Only Wal-Mart has both, and it appears that the giant has finally figured out how to make the two work together. The company’s goal is to add the title of world’s largest online retailer to its list of achievements.

So far in 2009, Wal-Mart’s on-line sales have risen faster than Amazon’s, but Wal-Mart had much farther to go. And while Wal-Mart does not specifically break out its online sales from its overall revenue, the company’s vice-chairman did say that the online business generates “several billion dollars.” Even for Wal-Mart, that’s not chicken feed.

Target and Amazon are likely to come up with some deals to counter Wal-Mart’s offers. But if Wal-Mart is serious about dominating online retail, the long-run results may already be discernible.

Paul Ausick

Note: Paul Ausick works for Wal-Mart.