Monday, October 20, 2008

Our Christmas gift: A toy price war?

It looks like one of the things on the horizon this holiday season is a price war in the toy aisle.

Here's a Meijer press release announcing cuts on 300+ toys:

The price reductions are part of the retailer's ongoing Price Drop program, where thousands of unadvertised items - ranging from health & beauty products to garden supplies - are reduced in price every day.

The Toy Price Drop program includes virtually all toy categories, with discounts up to 30% off Meijer's normal low prices. The Meijer Toy Price Drop includes everything from Hannah Montana and Playskool to Star Wars and Disney Princess toys. Other reduced-price items include toys from such popular brands as Lego, Bratz, Barbie, Monopoly, Fisher Price, Batman, Indiana Jones and Leap Frog, plus the ever-popular Hot Wheels cars available for just 88 cents.

And here's Wal-Mart announcing a $10 toy program, with the responses from Toys R Us, Target, and others:
Wal-Mart Stores, accounting for more than one-fourth of U.S. toy sales, has sent a clear message that it doesn't plan to be undersold when it announced 10 well-known toys, including some Barbie dolls and Hot Wheels car sets, for $10.

KB Toys, the nation's largest mall-based toy seller by stores, told Wal-Mart to bring it on. It cut prices to $10 or less on more than 200 toys, including other Hot Wheels sets, Matchbox cars and classic games such as Yahtzee.

Following Wal-Mart's cuts, which were 25 percent to 40 percent below the prices of Toys "R" Us and, Target began matching prices on three of the four toys it shares with Wal-Mart's $10 list.

Just as a guess, I suppose some retailers are planning to sacrifice margins on toys to lure shoppers in and hope to make it back on other sales -- a "loss-leader" strategy. Given their selling costs, though, I'm not sure trying to match Wal-Mart on low prices is a healthy strategy.

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