Holiday Price Wars Begin Early This Year

Includes: TGT, WMT
by: Todd Sullivan

Talk about getting a jump on the other guys. Wal-Mart (NYSE:WMT) is taking no prisoners this year.

12 weeks before Christmas Wal-Mart got into the game by cutting prices 10% to 50% on its "Top 12 Toys of Christmas," and signaled more reductions are coming. The move marks the earliest yet start to the holiday price wars. Last year, Wal-Mart announced reductions on more than 100 toys and games in mid-October which was about two weeks earlier than 2005 and came with deeper price cuts.

The cuts will likely put pressure on rivals including privately owned Toys "R" Us and Target (NYSE:TGT) whose share of the U.S. toy market are about 13% each. Wal-Mart has double that amount and has driven less-efficient competitors out of business in recent years.

A toy is a toy. If you are buying an Elmo doll or a board game for your kids, the place of purchase make zero difference. It is a price decision, plain and simple. We can I get the most for my dollar. What Wal-Mart has done with this move is place themselves at the top of that list in the minds of shoppers. Also, interestingly enough they will capture the Halloween shoppers who will then pick up so Christmas gifts for the kids when they are there.

I was in Wal-Mart yesterday picking up Halloween items and witnessed this very thing. There were several people picking out Halloween items who, when there also picked up an additional item "to put away for Christmas". These are sales that would not have been realized had Wal-Mart not got off to the early start.

It will be interesting to see how Target responds..