Wal-Mart discounts put other retailers on defensive; opportunities remain in serving niches the giant can't or won't reach.

It's the holiday season, and while consumers are worrying about what to get finicky aunt Margaret, retailers are worrying about Wal-Mart.

No one can compete with the retail titan's capacity for price-cutting over the long haul, and Wal-Mart Stores Inc. is aggressively taking advantage of its edge with slashed prices right out of the holiday starting gate this year.

"When you've got an 800-pound gorilla in the room everybody takes their cues from him," said Richard Giss, a partner at Deloitte & Touche LLP. "Most small stores don't compete, but they're impacted because Wal-Mart sets the stage for the expectations of the consumer."

Wal-Mart opted to go with early and deep price cuts in lieu of last year's celebrity-laden marketing blitz, Giss said, citing the under$20 price tag on a Lexmark International Inc. printer/scanner/fax combination device as an example.

Wal-Mart's move has many retailers on the defensive. The Gap Inc. chain offered a 30 percent discount on all purchases the day after Thanksgiving, but what to do for the rest of the holiday shopping season?

Giss said the best strategy is to serve niches that Wal-Mart can't, or chooses not to, go after.

L.A.-based Adir International Export Ltd. Inc.'s La Curacao stores, for example. offer merchandise comparable to Wal-Mart's. While unable to compete price-wise, the stores' Spanish-speaking staff, loud ethnic music and warm decor are more welcoming to Hispanic shoppers (though they might drive some Anglos away). La Curacao also offers shipping to Mexico and Central America and store credit cards.

Giss cited high quality toys as another sector that offers some opportunity.

"Wal-Mart killed any family toy companies in L.A. that Toys' R Us didn't," said Giss, "but there are still a handful of local shops offering high-quality and educational toys."

Staff reporter Emily Bryson York can be reached at [e-mail] or at [phone], ext. 235.