Wal Mart And The Price War

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By offering more luxury products and less low-end products, Home Plus would be taking a huge risk. However, that does not mean it’s necessarily a bad decision. The main reason they would do this is to separate themselves from other retail giants like Walmart and Target. The main risk is that customers will still see Home Plus as a low-end retailer, and will not trust the high-end products or at least think they are overpriced. Retailers like Walmart and Target have been engaging in a price war for years. Investopedia defines a price war as “when companies continuously lower prices to undercut the competition.” Price wars quickly erode profit margins by driving prices down to near the unit variable cost. The sum of a company’s profit margins must be greater than its total fixed expenses in order for it to be profitable as a whole. With lower profit margins, companies must increase their sales volume in order to stay profitable. With all of the companies lowering their prices, some of them are bound to fail. Therefore, companies should try to avoid competing with each other. Home Plus can do this by offering more high-end products. According to a New York Post article from last month, Target “said it will now match prices on good sold by Amazon.com, Walmart.com, and Costco and Sam’s Club.” “Price match” offers have become more common in recent years and are the epitome of a price war. It is very difficult to bring customers into your store if they know they can get the same

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