A holiday season marketing campaign by retail giant Walmart “rankled” the company’s rivals, according to The Wall Street Journal, when the company significantly lowered the price of Apple’s iPhone 5 without adequate stock to support the demand. Walmart’s competitors, who generally have price-match guarantee policies, were forced to match Walmart’s lower price, costing them tens of thousands of dollars in lost profits.
Best Buy is leading the legal and PR charge against Walmart’s practices as part of a larger complaint against the Bentonville, Arkansas company’s allegedly misleading marketing, in which it purportedly compares its prices against certain named competitors without disclosing that compared products are not identical.
It wasn’t until the iPhone 5, one of the most popular electronics in the last quarter of the year, became involved that Best Buy went public with its complaints, however.
Both Best Buy and Walmart reduced the on-contract price of the iPhone 5 in the final weeks of the holiday shopping season, each lowering the cost of the entry-level 16 GB model to $150. On December 17, Walmart went one step further, with a large Facebook ad campaign touting the phone for only $127.
The problem, according to Best Buy, was that Walmart had only a small number of iPhones available at this price, and not nearly enough to satisfy the increase in demand. Best Buy, however, had ample stock and was obligated by store policy to match a competitor’s price.
The result was $65,000 in lost profits in a single day. Other retailers who price-matched Walmart also took losses, but those numbers have not yet been disclosed.
For its part, Walmart claims that it did nothing wrong, stating that it shipped twice as many iPhones during its $127 sale than it averaged before. Without disclosing sales figures, however, Walmart’s claim is of little value.
Walmart’s aggressive campaign has finally prompted Best Buy and other competitors to take their case to the states, with attorneys general in at least half a dozen states receiving complaints against the retail giant. “This is a price war that’s causing many retailers a lot of angst,” Leon Nicholas, an analyst at consultancy Kantar Retail, told The Wall Street Journal. “Walmart had lost the pricing discipline it became famous for and now they are desperate to get it back.”
From a consumer perspective, the fighting between companies like Best Buy and Walmart is not likely to evoke sympathy. Best Buy has long been criticized by many for charging exorbitant prices for accessories such as USB cables, high pressure extended warranty sales pitches, and expensive and inadequate technical support.
Regardless of the outcome of this situation, at least several thousand customers were able to take advantage of the price war and obtain an iPhone 5 at a significant discount.