Last "Black Friday," for its annual post-Thanksgiving sales blitz, Wal-Mart Stores decided to slash the price of one of the hottest electronics items for the holidays, the 42-inch flat-panel TV, to $988. The world's largest retailer had staked similarly audacious positions before, in numerous product categories, as part of its quest to remain U.S. retailing's "low-price leader."

In turn, Wal-Mart's move caused a free fall in prices of flat-panel televisions at hundreds of retailers -- to the glee of many people who were able to afford their first big-screen plasma or liquid-crystal-display (LCD) model.

Now, it is becoming apparent that Wal-Mart's calculated decision to break the $1,000 barrier for flat-panel TVs triggered a disastrous financial meltdown among some consumer-electronics retailers over the past four months.

The fallout is evident: After closing 70 stores in February, Circuit City Stores on March 28 laid off 3,400 employees and put its 800 Canadian stores on the block. Tweeter Home Entertainment Group a high-end home entertainment store, is shuttering 49 of its 153 stores and dismissed 650 workers. CompUSA is closing 126 of its 229 stores, and regional retailer Rex Stores is boarding up dozens of outlets, as well as selling 94 of its 211 stores.  "The tube business and big-screen business just dropped off a cliff," says Stuart Rose, chief executive officer of Rex Stores. "We expected a drop-off, but nowhere near the decline that we had."

Clearly, these retailers are taking such drastic measures because they don't see any respite in sight. Since early February, when the companies first started closing stores and announcing layoffs, most of their stock prices also have been battered. Circuit City shares have fallen 24%, to $18.76, since the end of November, when the price war started. In the same period, Tweeter's shares declined 32%, to $1.72, near a 52-week low, and Best Buy's stock is down 9%, to $48.73. Shares of Rex Stores have been flat, down 0.7%, to $16.98.

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 sectors over the past two decades as Wal-Mart's business stature grew dramatically.
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Something Registers Wrong:
When it comes to price, it’s hard to beat Wal-Mart But the "everyday low prices" come at a high cost to its employees. A recent report from consumer group Los Angeles Alliance for a New Economy found that Wal-Mart employees earn 20% less than the average U.S. retail worker, and some $10,000 less than what the average two-person family requires to meet its basic needs.

Also, the company has fewer than half of its employees enrolled in its health insurance plan, compared with 67% for the average large employer. As a result, taxpayers end up subsidizing the company’s workers. "In California alone, taxpayers pay $32 million annually in medical care for Wal-Mart employees," the report finds.

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On The Positive Side:
Finally, those who fault large discounters for the decline of individual shopkeepers are ignoring trends that have been around for more than a half-century. Similar accusations were made after World War II, when the growth of supermarkets such as A&P contributed to the demise of locally owned butcher shops, vegetable stands and dry-goods stores. Yet today, the supermarket is a symbol of the American way of life, and specialty stores that cater to particular tastes, such as ethnic and gourmet foods, are still thriving.

Let me say that my family and I have not stepped into a Wal-Mart store for years. When one opened in Philadelphia a decade ago, we found the checkout lines far too long and personal service lacking. We prefer to shop at more "upscale" discount stores, such as Target.

But I vividly remember the people who shopped at Wal-Mart. Many were from Philadelphia's poorer neighborhoods, and they shopped as if every penny counted. When I see groups such as Acorn, the Association of Community Organizations for Reform Now, lead the battle against Wal-Mart by claiming to fight for "the disadvantaged classes," a thought comes to mind: Have any of their members ever spoken to any of the millions of Wal-Mart shoppers for whom the chain's "everyday low prices" are critical for making ends meet?

On the international front, those who criticize Wal-Mart for encouraging "sweatshops" in the developing world also fail to see the big picture. John Tierney, a columnist for The New York Times, recently wrote that Wal-Mart is as deserving of the Nobel Peace Prize as are Bangladeshi economist Muhammad Yunus and Grameen Bank, which he founded. Yunus and Grameen won the award in 2006 for their role in granting small loans to help poor villagers in Bangladesh start their own businesses. But, Tierney notes, Wal-Mart is responsible for the creation of far more jobs in developing nations.