Gutting Companies
On Nov. 17, the national retail chain Toys 'R' Us, announced that it would close 146 of the stores of its Kids 'R' Us subdivision, which sells clothing, as well as 36 of its Imaginarium stores (which sell "educational" toys and games). The shutdowns will be completed by Jan. 31, 2004, eliminating up to 3,800 jobs. Kids 'R' Us was unable to slash the prices of its children's clothing deeply enough to compete with Wal-Mart.
Moreover, Wal-Mart has launched an aggressive campaign, through cut-throat pricing, to destroy the parent company, Toys 'R' Us, the second-largest toy seller (after Wal-Mart) in America. As an example of how this strategy operates: The popular Hot Wheels T-Wreck Play Set toy sells for $42 wholesale. However, according to the Nov. 19 Wall Street Journal, Wal-Mart is now selling that very toy at $29.74, a loss of more than $10 per unit. Wal-Mart sells 21% of all toys sold in America, and if it knocks out its leading competitor, its share could reach 30%.
Hoover has been a leading name in vacuum cleaners for nearly 100 years. During the third quarter of this year, Hoover's vacuum-cleaner sales declined by 20%, which the company blamed on competitors' models priced at $79-made in Asia to meet Wal-Mart's price demands-outselling Hoover's $100-plus vacuums produced in the United States. Hoover cannot withstand such drops in sales volumes.
Hoover's parent company, Maytag, is demanding cuts in health insurance and other benefits, plus changes in job-security rules for production workers at its Hoover vacuum manufacturing plant in North Canton, Ohio. If the workers don't cave in, Maytag has stated that it will move Hoover vacuum production to cheap-wage sites in Texas, and to maquiladoras in Ciudad Juarez, Mexico.
