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Jessica Rinaldi / Reuters
Target has been aggressively cutting prices on toys to lure shoppers, like this woman pulling two carts on Black Friday in Torrington, Conn.
Selling toys during the holidays is hardly child's play. It's a bare-knuckle brawl between big-box behemoths.
"Price competition is always aggressive between the big retailers each holiday season, particularly in toys," Will Coleburn, senior vice president at manufacturer Toy State International, Inc., said via email. "This year they all were much more aggressive."
According to a Goldman Sachs report, Target slashed prices on a "basket" of hot toys, undercutting Wal-Mart by nearly 19 percent. Toys like Hasbro's Sesame Street Let's Rock Elmo, which has a "regular" price of $60, is selling for less than $20 in the final days leading up to Christmas. It's a bonanza for shoppers, but some analysts worry all those cut-rate Elmos — and My Little Ponies, Mario Karts and Pokemons — will cut into profits.
Wal-Mart's heavily touted layaway plan, which it started advertising even before Black Friday, gave it an early edge in the category, thanks to shoppers who can't or won't put their holiday purchases on credit cards. "It was one of those categories Wal-Mart had talked about not being beaten in," said Joseph Feldman, senior retail analyst at Telsey Advisory Group.
Target's increasingly steeper price cuts after Black Friday challenged Wal-Mart's initial lead, but Feldman said it's not a risk-free tactic. "From a profit standpoint we wont be surprised if we see a hit to profitability," he said.
"[Target] is getting aggressive and promotional, and it will prove difficult to maintain market share and gross margin," Janney Capital Markets analyst David Strasser said in a recent research note. "It’s clearly not a coincidence that (Target) introduced money losing sales Friday Dec. 16th and Saturday the 17th. This coincides with (Wal-Mart's) deadline on layaway and the last payday before the holiday."
"Target's philosophy is, the only way we're going to capture revenue is by getting them through the front door," said Richard Feinberg, a professor in Purdue University's department of consumer sciences and retailing. "Whatever gets them through the front door, we have a high probability that they're going to spend additional money."
Hot toys, even if the store has to take a loss on them, function as effective holiday-season loss leaders. Wal-Mart, which has been losing business from lower-income customers to dollar stores, got a multiplier effect from its layaway program: Customers have to return to the store at least once and possibly more often to make payments on their items.
Target also has a couple of tactics to mitigate the money it's losing by heavily discounting popular toys. Price cuts have been coupled with $10 Target gift cards on some purchases. Gift cards virtually guarantee a return visit, and customers are likely to dig into their own wallets to augment the "free money." Target also offers 5 percent off purchases for customers who have its store-branded credit card. At around 23 percent interest, cardholders who revolve a balance will return that 5 percent and then some to Target. Doling out extra discounts to cardholders also helps Target attract the spending power of higher-income shoppers.
As attractive as these last-minute price cuts are, though, shoppers might not be able to score them because many hot toys are sold out. Another must-have toy this season, Leap Frog's Leap Pad Explorer, is sold out on both the Wal-Mart and Target websites, and parenting blogs boil over with rumors and tips about where to score one. This pre-iPad for kids aged 4 to 9 never dropped below $99 at major toy sellers, although Target cardholders could at least count on a 5 percent discount. According to Goldman Sachs' tally, out-of-stock items accounted for 68 percent of the toy basket at Target and 60 percent at Wal-Mart.
"Inventory management has become increasingly important for the retailer," said Coleburn. He added that it's also become more challenging because shoppers tend to hold out until the last minute to see if prices will drop, which makes it hard to forecast demand.
"Their whole goal is to sell everything as quickly as possible," said Feinberg. "They've gotten so good they'd rather sell out than have to deal with it after Christmas and have another wave of discounting."
Related stories:
Amazon's most popular gifts this holiday season
Toymakers aggressively court mom bloggers
Stores make a grab for last-minute shoppers
One analyst says this is the year online sales will go to the next level. Target, for instance, revamped its website in preparation for the holidays. CNBC's Jane Wells reports.
Leave a Comment:
the other day, i read a comment on a article complaining that schools were teaching kwanza but not christmas.
well, i suppose the commentator has nothing to worry about because walmart, toys r us, etc..... do teach the spoiled rotten kids what christmas truly is in america -
and it aint got nothin to do with the three wise men and the little baby born to a impoverish family.
Shopperben you are getting a lump of coal , or something simular in your stocking ....or maybe in your shoe
Shopperben- please be sure to have an actual, relevant point prior to posting a comment.
Shopperben does have a point, although poorly presented. Christmas in America and other places has become about the gifts, the food, the profits. But Christmas should be about the simple pleasures of life, searching for peace on earth and sharing with those less fortunate. It is why so many of us object to one of the major symbols of Christmas being called a HOLIDAY tree. No, it is a holy day tree; one that represents the gifts which we believe Christ, as the Son of God, brought to us: Simple pleasures, a natural life and renewal. Christmas gifts are wonderful, if the idea of sharing and expressing love are maintained.
Thanks Jantor, you said it right. Christmas used to be about family, giving to the less fortunate and everything related. Even if one does not believe in Jesus Christ, it's can still be joyous to get together with family and friends to celebrate each others lives and create lasting memories. It also puts a light in your soul to be able to reach out to your neighbors in need and make their day just a bit brighter. You can't deny they exist. That's the real spirit of Christmas....excuse me, the holidays. Geez.
Today it's nothing more than a greedy retail feeding frenzy. If you really love them, buy them a Lexus. Come get your over priced video game systems and all the accessories or you don't really love your kids. Diamonds are forever.
Buy, buy, buy or you'll be guilty of not contributing to the economy. I actually heard something to this affect a few Christmas's ago when we were at the height of the recession. If you can't lure them with low prices, use the guilt trip. My how times have changed.
that is so true,i wonder if the three wise men stood in line for 3 days waiting to get a bargain on gold.
GO TARGET!!!! i love that store, stepping into a walmart gives me the creeps :0
The only thing about Target is that they refuse to donate toys to the Marine's Toys for Tots program.
Neither of those stores will gain access to any of my dollars (or cents) until they reverse their bigoted, prejudiced, conservative policies. There are far better places to shop where human rights are supported.
Sam Walton must be spinning in his grave with how Walmart is being run. Did you know they used to have a "Buy American" slogan and led the charge on paying their workers more than the industry standard on principle.
After Sam's death, the execs decided on cruel, brutal efficiency. Muscle the suppliers to drop their prices to well below bargain basement or force them out of business by supporting a competitor of theirs what would comply. The end result was that China became the #1 source for nearly all Walmart products. Next came the worker abuses.
Target is following a similar business model and I'm disgusted.
Boycott these scum, buy American where you can, comment with the management that you like when they stock American products and when their workers appear happy.
Write your senator and congressman that we need to stop supporting companies that outsource American jobs with our tax dollars!
Seriously? Post 3.3.. Well said..!!
I think Walmart also has stores in China. I wonder if they are selling made in U.S.A. goods there.?? I refuse to walk in a Walmart store..
The container ships arrive in the USA with lead painted toxic toys & inferior junk, and leave with American jobs.
Washington wants to raise taxes on the few that are still able to produce a living in America.
Government jobs produce debt that the private manufacturing and service jobs that still exist here are forced to support.
Bad government results from too much government..
I went shopping last week trying to find anything, Anything labeled Made in The USA. I found Nothing but Made in China. What the F--- have we become?
I have 2 grandchildren they both asked for Fijit Friends, there was never a sale on that item. I personally think all the adds have stunk so far.
"Fijit Friends" are a bad buy, imo. The novelty wears off very quickly.
A wise businessman I met years ago explained that if you are operating a retail business, you are in a contest for the consumers' dollar and your competition is every other retail business your potential customer has access to that is vying for a piece of the average adult citizens' disposable income.
It is now assumed to be universally true that the average person's disposable income keeps shrinking as costs associated with 'necessity' continue to rise. A marketing course instructor I had years ago often reminded us, 'It isn't easy to make a buck!'. Times being what they are, I think it's fair to say that if you're in business, it is now quite literally you against the whole rest of the world!
Just slap some naked ladies on everything and you'll do fine.
Well, if you're in a market area that's likely to be receptive to that strategy, it could probably help!
Its simple can China beat China on price.
No, but China doesn't have to beat China on price. There's plenty of other up and coming third world nations in that corner of the world who are plenty willing to do that!
Once upon a time, the best of everything came from Europe and other than raw natural resources, any product from the US was considered crap. After roughly 1900 or so, we were a world leader in manufacturing high quality goods. Japan was once considered to be the world purveyor of cheap junk. My, how things have changed...Sony, Toyota, etc. They're hardly 'junk' and they're anything but cheap! China is really stepping up in the world. Now it's time for Viet Nam, Bangladesh, and other nations to start climbing the 'ladder'. I'm sure eventually the world's cheap labor will come out of Africa.
@ the TiGor
Agreed, what will be interesting to see however is whether China will allow themselves to become a consumer economy, or shoot themselves in the foot to remain an export-driven economy.
China is at odds with itself. They have a ruling elite of industrial moguls and high-level bureaucrats (with very little differentiating the two) that enjoy having a base of several hundred million serfs working for almost nothing.
Eventually enough of China's people will become sufficiently educated that they won't be willing to send their 10 year old to hand-severing/suicide inducing factory-labor.
Eventually the Chinese people would like to be able to be paid in money where the paper it's printed on is not worthless in international exchanges.
Eventually the Chinese people would like to be represented by their government and not merely be servants to its hunger to continue enriching a privileged few at the top.
Will China reach an age of enlightenment peacefully, or through another bloody revolution...that's what remains to be seen.
It's hard to know with anything having to do with China.
Their entire situation always seems to be, well, weird!
They'll do things that have been dismal failures in other countries, and somehow they'll manage to get away with it, in some cases even enjoy qualified success. Go figure.
I had long thought that when the Central Communist Party loosened the screws just one turn too many, things would come undone rather quickly as has happened in other totalitarian states. In simple terms, the best I've been able to gather is that they're just good enough at knowing how far they can push the envelope to satisfy the masses without triggering an outright revolt.
My understanding is that conditions over there are very uneven. The urban areas are governed rather gently and the more rural areas are often ruled rather harshly. This is something we often saw in the Soviet Union, where Moscow would 'dump' on this or that geographic region for whatever the reason, and it came back to haunt them. So far it doesn't seem to be going that way in China; I suppose the city dwellers have it good enough that they couldn't care less how the rural population is treated.
China does have a rapidly growing middle class that is a very active market for products of all kinds, and they're probably not the ones working for next to nothing and it's probably not their 10 year olds going off to sweat shops every morning.
I'd suspect that most of the education over there is still rather heavily laced with indoctrination.
If change is allowed but only so slowly that no one has any real reason to become very dissatisfied, I'm thinking the government will still be able to retain vast power over the people for the foreseeable future. Time will tell!
Agreed
However, I think that China is generating a massive number of very disenfranchised people. They have an underclass migrant working population that's larger than the entire population in the United States! China's government needs to be very careful how it treats these people. And from my understanding, there's already A LOT of civil unrest, it's just that China, unlike the former USSR is a favored trading partner with the US, and we've given them all sorts of tools to be able to censor their media and quell uprisings with Western technology as opposed to good old fashioned Eastern Bloc tactics.
China is reaching an empasse as far as I can see. More and more people in the US are tired of seeing middle class jobs moved to China in the interests of slave labor prices. Idiots blame the unions on it, the more educated realize that it is not the local cost of labor so much as it is the exchange rate disparity between our countries that's to blame.
If the US drops China as MFN, or the US shifts its fiscal policy away from the "Strong Dollar" approach, the house of cards that China has built its economy on will come crashing down.
A country that's had double-digit GDP growth year-over-year shouldn't have a currency as depressed as theirs. Additionally, they've over-capitalized, over built, and over expanded well past both their internal demand and even past international demand for numerous products/commodities (steel, rubber, honey, etc etc etc.). The only reason why China has been able to maintain these over-supplied industries is through massive subsidies. If China's government has even one blip in its revenue stream or exports slow and China has to cut a subsidy even slightly or can't raise it accordingly, you will see massive swathes of plants closing down because they cannot produce anything at a profit on their own.
Like Russia before them, they are over-managing their economy by both requiring students to major in things that the Chinese government deems necessary for growth (note, not liberal arts or philosophy, they're cutting classes in hard-sciences like Biology because they currently don't have a market-demand for it!) while simultaneously artificially supporting labor-intensive industries because the country wants to employ as many of their people RIGHT NOW and not let people choose the optimum path given their growing economy.
I contend that if the US were boycotting trade with China and requiring similar things from its NATO allies like during the height of the Cold War with the USSR, China would not be able to get away with many of the short-sighted things they're doing...the US is essentially subsidizing the CCP's agenda with all of our unilateral trade agreements
I certainly don't disagree with you on anything here!
Like I said, the entire situation with China has always proven to be quite strange and consistently seems to defy expectations developed from similar happenings in other nations. What would almost seem certain to happen just doesn't always happen that way with China.
We'll know much more in hindsight than we ever will in foresight!
There's many places in the world where I say, 'Glad I don't live there!', but I can't even say that about China. I'd have to be specific to what part of China I'd be glad to not be stuck in. That migrant worker underclass certainly has it rough, but a lot of other people are doing quite well. It would be almost like someone saying, 'I'm glad I don't live in America!' and citing high crime, traffic congestion, and outrageous costs of living. It'd only be valid for the major metropolitan areas! Or even listing any number of issues affecting small towns. Most of us who live here would be asking, 'So?' The biggest cities and the smallest towns are extremes most Americans don't experience themselves.
China, it seems, lives and dies by its own unique set of rules.
Apples vs. Oranges, the variables are different. USSR couldn't pull this stuff off because they didn't have MFN status with the US and large amounts of outsourced industries operating in their country, propping up both local demand and adding expertise to their labor pool. China does.
Absolutely! I just hope that the US can change course before we are as indebted to China's success as they are to us. Right now, if China crumbled, it would screw over the US financial markets, but US exports would skyrocket and once outsourced jobs would come flooding back...then again, so would a lot of Chinese nationals who've been utilizing US-birth-tourism for the last few decades.
Not I. I enjoy being able to speak how I like and not fear that some G-man is going to arrest me based on talking ill about my government. I also like that I can have as many children as I wish.
Oh, and having easy access to Western medicine is also a MAJOR plus! You want to make a lot of money in a trip to China? Bring a case full of Aspirin and Amoxicillin with you and see how much people are willing to pay you for it! Just don't get caught LOL
China right now is a land of extremes. When you are in Beijing you feel like you may as well be in Tokyo or Hong Kong. Travel just outside the city's urban borders and you feel like you've stepped into the 1700's.
We're on the same page, even if in different paragraphs.
You're spot-on with the 'apples vs. oranges' assessment, which is the problem with sizing up China. They're just enough different from the other examples we have to go on that they're too unique to predict accurately.
As for government surveillance and the child limitation policies, what people have shared with me is that, again, it depends mostly where you're at and who you are. This is perhaps one of the exceptions to the city folk having it better. The tens of thousands of state security personnel monitoring the internet in China can't do much about those who have no access to the internet! My guess is that anyone who, because of their location and status, isn't considered significant enough to pose any real threat probably won't be watched too carefully. Word of mouth can only go so far and if you're on the lowest rung of the social ladder, who's really going to listen to you? Anyone who's been in a position where they were allowed to get anywhere in life is watched rather closely, so I am told.
Funny how the Chinese clamor for modern western medicine while some westerners get all excited about ancient Chinese folk medicine, isn't it?
Your example of how China is a land of extremes - Amen to that!!!
Take care, the TiGor
@ the TiGor
Most certainly ^_^
Yes. China has a very clear double standard for the wealthy and well connected. Laws only apply to the people too poor to escape them. Very reminiscent of USSR and someone similar to the ultra-wealthy in the US today.
The first "Party Official" who is next up the ladder from you, that's who pays attention. If you're in a rural village, the CCP have local offices that offer their own fascinating brand of corruption seen almost nowhere else outside of the Republic of Congo. If anything, you're "free'er in the cities than the countryside since there are both more opportunities for you, and that there are more influential people in your district that wouldn't put up with the kinds of corruption and abuse that poor and uneducated farmers must.
Only if they are really stupid and embarrass their local officials. Stay under the radar and off of people's backs and you can get away with quite a bit. China's officials know very well about the ways of masking IP's and using proxies to get past "The Great Firewall", but they don't really care until you start using it to call out names of party officials who are trying some crap or try and organize a demonstration.
An old East Asian adage, "The raised nail gets hammered down"
I chalk it up to "grass is always greener" mentality combined with people who have a contempt for the advice of specialists, and feeling powerless.
The thing I find most consistent about such people (along with the anti-vaxxer crowd) that are into the "eastern medicine" or holistic medicine have one thing in common. They self-administer.
People pay good money to feel like they are in control, and it's a billion dollar industry to satisfy that desire.
Great chatting with you!
The things I remember most about Christmas growning up are things like the fire going in the fire place, the lights of the tree reflecting on the celling, all the bright colors of the presents, the snow on the ground, the lights on everyone's houses, seeing all of my family - I don't remember any of the presents I received. Today, unfortunately - Christmas seems to be ONLY about the presents!
Um, yeah. Christmas has ALWAYS been about the presents. All that other stuff is what we think about when we are older. But when we were kids, it was always the presents.
That is so true!!!! I remember all the lovely things like the lights on the tree, snow, Mama's cooking, etc... now. But..........I was just talking to Mama yesterday and she reminded me of a fit I threw because I didn't get enough "gifts". I was lamenting to her that my son was way more interested in the gifts than the traditions of family. Just part of being a kid I guess, but it did make me feel better because one day he'll remember the sweet stuff and complain to me about his kids attitude. Maybe that is a holiday tradition, too.
To cc-2838629: No, that's just a perk.
Reflecting back to when I was a kid, I remember the excitement of waking up Christmas day. Since we could not open gifts until everyone was awake, I also remember waking up in the wee hours of the morning (4:30AM) and being told to go back to bed and wait until the big hand on the clock got to 7. Rather than going back to bed, we (my sister and me) would sit around trying to guess what was under the tree. Of course we would make lots of noise hoping to get our parents and older siblings out of bed, but they never came out until around 7am. That drove me crazy. Given how hyper we were, I often wonder if making us wait until 7 was a form of child abuse. Or, was it a way to teach patience? I would like to think it was the latter.
Kramer, Bartaromo and the Obama administration are gloating over the big sales increases this season, but they aren't telling the rest of the story. Big retailers aren't making the same profit margins of the 50's and 60's with 50% discounts out there. That tells me the economy is not all that great if businesses have to offer big discounts in order to move their products. Even your big grocery chains are offering double coupons and rewards to beef up sales to an already drowning economy.
EU or no EU resolution, it will take years for our economies to recover and many of the jobs lost since 2008 will never return. As long as those big discounts keep coming to prop up sales, don't expect any massive hiring anytime soon, and expect salaries and benefits to continue to decline as compared to the 50's and 60's, which means more discounts in the coming years to keep the consumer coming back for those cheap products. A recession feeds on itself when Congress fails to act.
Did you just bring Obama into this? Seriously?
And you can't compare things to the 50's, since the boom just happened after all the rationing during WWII.
Agree, although I would like to add that we have been practically giving away our manufacturing with Free Trade Agreements, loopholes and other bad trade deals for decades. What really pisses me off is when countries export product A to us, and we cant export product A to theirs by law. They protect their business and we cant for some reason? The low tech manufacturing has moved overseas and left alot of middle and the poor looking for fewer and fewer decent jobs. This is combined with the decline or stagnant wages for the past 3 or 4 decades, while corporate profits and business profits has generally gone up and their taxes have gone way down. Until the middle class stops declining and has more disposable income there is no recovery or growth like we want to see. If we could get the money out of politics we could have a real debate about xyz policies and restore some confidence for regular business as well as citizens belief in goverment. This particular congress has been especially loathsome, if they haven't noticed alot of us are really suffering.
Target for the win. You won't catch me in a Wal-Mart EVER!!!
I'll pick Target over Walmart but I have lost some respect for Target in the last six months. Their zealous push to become a poorly stocked grocery store while jacking up their prices on everything else has left me looking elsewhere.
I'm sorry that this story only talked about Target and WalMart. There are many other "big box" stores that have a large share of the market this year. Profitability is wonderful for these large companies, but if I understand it correctly, for each $100 spent in a local store, about $500 gets generated in local economy. And don't forget, our national economy starts at the local level.
Jesus is the reason for the season !!!!
The shopper's BEST friend on earth: RED LASER for the iPhone.
See something you like at Wally World? Scan the bar-code with Red Laser and see who's got it cheaper, then force them to match the lowest price you can find! Same with Target and especially Best Buy (the WORST price-gouger!) and a lot of other places.
Even if they don't have a price-match policy, get them to match it at the checkstand. Chances are you'll get the lower price, because when you hold up a checkout line this time of year, the stores can't possibly make up the loss in revenue! Lost time is lost money, especially when cashiers scan hundreds of items per hour.
Be prepared to tell them to shove it, and leave it at the checkstand if they don't give you the better price, though, and do the same thing at the next store. Worst-case scenario, you just go to the place that's got it cheapest. But I've found embarrassing stores into matching competitors' prices works better than 90 percent of the time.
The rule I've found is the bigger the price difference, the more likely the store is to immediately match the lowest price. I went into Best Buy to get a high-speed wireless-N router, and found one for $139.99 (on "sale"). I Red-Lasered it and found it at a local Kmart for $69.99, and forced Best Buy to match the price, which was HALF of their "sale" price.
Note: Red Laser may also be available for Android and Windows Phone, so check it out for yourself. Number one best app on earth.
The article states: "Target also offers 5 percent off purchases for customers who have its store-branded credit card."
The 5% discount is also given to people who hold Target affinity (frequent shopper) cards, and that doesn't lure anyone back into the store in exchange for the benefit. It also doesn't cost the shopper a cent.
There is no such thing as a Target affinity card. The only way to get 5% off is to either have a Target credit card, or to hook your checking account to a Target debit card.
I made some purchases at a local Target store last weekend. I was in and out of there in less than 15 minutes. The store was empty and so was basically the parking lot. I would not be surprised if they were out of business in a year or so. The prices there seem like they are higher than ever which means for me, they will have an extra space in the parking lot. Next time I will probably also go to WalMart where the prices are more in line with my budget. If I'm going to spend hundreds of dollars for dinnerware, I'm going to the mall. Target has got nerve.
When are people going to wake up and realize Christmas isn't about how much Chinese-made crap you can buy for your kids? Think outside the box a little. Go take a family trip over Christmas or something.
One thing that has been sicking me lately aside from the annual gluttony of Christmas is the heavy use of "Bait and Switch" advertizing. A significant portion of stores and TV adds show this illegal form of advertizing daily. One example in my opinion is dell- they say you can get this lovely computer for ~400$. when you go to buy said computer your bombarded with add-on parts or upgrading to a better model, more memory etc... ( I don't mean to pick on dell and I believe they have great products) but I hate this form of advertizing and "up selling" which occurs in the stores. How many time have you got to one of the stores mentioned in this article and asked for help with locating a simple kitchen item and then the employee points out to the "guest- were no longer customers fyi" to convince them to buy the item just like it right above but it costs 5$ more because it has a better handel..