This week Wal-Mart laid down a challenge to its competitors in toy retailing by substantially lowering prices on more than 100 key toys.  Wal-Mart's scorched earth strategy is similar to the one the category-killer employed in 2003 (see 'Wal-Mart Applying Toy Category Kill Shot'), although in 2003 Wal-Mart waited until November 19th to announce its price cuts.  A number of Wal-Mart's competitors in the toy business including FAO Schwartz, which went out of business, and KB Toys, which filed Chapter 11, were affected by the giant retailer's holiday price-cutting in 2003.  This year it will be Toys R Us and Target that will have to respond to Wal-Mart's price challenge.

Wal-Mart's newly announced price cuts dropped the company's prices by a substantial amount -- the Hot Wheels Radar Gun from Mattel was reduced from $29.74 to $20, and Playmates' popular Amazing Allysen and Amazing Amanda dolls were reduced from $99 to $69.

Mass market favorite board games were a special point of emphasis for Wal-Mart with V.P. Scott McCall telling the trade, 'On average, our rollbacks on board games make the prices comparable to what they were 20 years ago.' Games such as Sorry!, Life, Battleship, and Operation, which were selling for anywhere between $13 and $15, are now uniformly priced to sell at $8.  Hasbro's new Monopoly Here & Now, which lists for $29, has been reduced to $15.

It should be interesting to see how Wal-Mart's competitors respond to this opening salvo in the toy price war.  Amazon has already matched Wal-Mart's price on Monopoly Here & Now with a 48% discount.  While Wal-Mart's announced price cuts only affect a little more than 100 items now, the giant retailer is known for cherry-picking categories and just carrying the best-selling items, and the Bentonville behemoth can do a lot of damage by grabbing a bigger share of sales of the top toy releases. 

The kind of brutal price competition that Wal-Mart unleashed this week will certainly lead its competitors to petition suppliers to create more 'exclusive' merchandise items that will insulate them to a degree from price competition, although the die is undoubtedly already cast for this holiday season.