Did Wal-Mart Kill the TV Business? By Mark Fleischmann May 18, 2007 — At the root of recent woes in the TV-retailing business is the legendary "Wal-Mart effect," according to a news analysis by Business Week.

More specifically, Wal-Mart's decision to drop the price of a 42-inch Panasonic plasma below the psychologically crucial $1000 barrier has caused a chain reaction of retail misery that has caused job losses and store closings at Circuit City, Tweeter, CompUSA, and Rex Stores.

The trouble started on Black Friday, the first shopping day after Thanksgiving for the 2006 holiday shopping season. Once Wal-Mart made its move, other chains were forced to match the price or at least offer something comparable on similar products.

"The carnage has one phrase written all over it: the 'Wal-Mart effect.' For many electronics competitors, the experience with flat panels has been a replay of what happened in other businesses," writes Pallavi Gogoi, citing similar collapses following Wal-Mart's entry into the grocery and toy businesses.

"By most accounts, Wal-Mart had little to lose by dropping the price on the Panasonic TVs because it sold out its inventory nearly instantly," adds the BW correspondent. Translation by Wes: "By limiting its per store on-hand inventory, Wal-Mart took a small hit while causing the entire industry to melt down."

Also contributing to the downward price trend were competition from new brandnames and ramped-up production, according to BW. The pain continues at Circuit City. New display technologies may eventually offer retailers and manufacturers temporary respite from sliding prices. However, in television, the move toward commodity pricing is a well-established longterm trend.