TIME asks, Will Wal-Mart Steal Christmas?
Putting the fun back in toy shopping – not least as a way of enticing customers to stores all year round – is critical if Toys “R” Us is to survive the toy wars, which look particularly brutal this season. In late September, Wal-Mart lobbed an ominous warning shot by discounting a basket of popular toys several weeks earlier than in past years. “We’re going to be the low-price leader, and that will include holiday toys,” declares Wal-Mart spokeswoman Karen Burk. To its rivals, the depth of its price cuts has come as a shock. The company put the popular Hokey Pokey Elmo on sale at $19.46, 30% less than the list price and reportedly below even the wholesale cost. “Did it catch us by surprise? Yeah,” Eyler admits. Still, he adds, since early November “we’ve been price competitive.” That’s good news for consumers, the prime beneficiaries of such skirmishing. Target last week reduced the price of its Bratz disco-doll set from $100 to $65, challenging rivals to follow suit. Wal-Mart matched the price, while Toys “R” Us sells the set for $100 in stores and $80 on Amazon.com, its online partner.
As successful mass merchandisers, Wal-Mart and Target can more easily afford a price war than Toys “R” Us and other toy specialists. Wal-Mart’s sales of high-margin items like flat-screen TVs can make up for losses on low-margin toys. It’s a classic loss-leader attack. Wal-Mart figures that supercheap toys will lure customers to the store, where they might buy pricier items. That puts the squeeze on toy specialists, which must either follow suit and risk losses or try to hold their prices and bet that their superior customer service and selection will enable them to compete.
This sounds win-win to me. There’s no reason consumers shouldn’t get the lowest price possible for commodity goods. The way for niche retailers to differentiate is by offering better service, a more diverse product lineup, and a more pleasant atmosphere than the discount chains. None of which should be difficult. I frankly hate shopping at Wal-Mart and find Target only slightly more pleasant. I’d be willing to pay slightly more for a better shopping experience elsewhere.