A toy story

How bad is this lingering recession? So bad that Wal-Mart and Target are locked in a bitter battle for consumers’ hearts, minds and, most importantly, dollars through their respective toy sections.

Pardon the pun, but this is no game. Officials at both giant mass merchandisers, obviously reading the tea leaves that show consumers as hesitant as ever during this holiday season, have pulled out all the stops in their battle to win market share in the all-important toy business. Cut prices on toys, they surmise, and consumers will be drawn to their stores. Of course, they hope that shoppers buying toys will also stop by another department or two to purchase other products.

Wal-Mart attacked first in what is turning out to be an interesting game of chess. The chain reduced prices on more than 100 toys, including Barbie and board games, to just $10. Target fought back with its own marketing pitch. The chain announced in early October that it was cutting the prices on many of the most popular toys it carries by up to 50%.

Of course, this all comes after Sears announced that it would put a renewed emphasis on the toy market after years of practically ignoring the department and losing significant market share in the category. Wow, talk about a sign of the times. Sears owns Kmart, which is already the forth-largest toy seller.

No one should be surprised that this Christmas is not shaping up to be a banner selling season. Some retail analysts and industry associations predict that sales during the holiday period could fall by as much as 1% to 2% this year from last year’s far-from-stellar performance. Some merchants are aggressively pursuing shoppers to get them to at least consider their stores during the next two months.

It is not only a good strategy, it is just about the only one that makes sense right now. Consumers are on the defensive, trying to balance their checkbooks while making sure that their families have food on the table. All the while they are worried that they may be the next person cut at the job.

Retailers have to give them a reason to shop for that discretionary purchase. Inexpensive toys can be the magnet to get consumers excited enough that they will make a special trip to a Wal-Mart or Target.

Other categories, including the baby and pet sections, can have the same impact on the consumers’ psyche. And retailers know it. Wal-Mart, for example, has made it clear that it intends to build up assortment in both of these categories to attract more consumers into its stores.

Grocery retailers need to utilize the same strategy with toys and other highly visible products and segments. The key is to get consumers enthused enough that they will actually want to visit. Retailers must figure out what those categories are and what they need to do—in terms of price, assortment or convenience—to get shoppers to notice.

What’s old may be new again. At least that was the thesis of an article in The New York Times in October. The article focused on how many CPG companies have increased the advertising for their icon brands after years of either pushing new items or simply ignoring their existing items. The trend includes many nonfoods categories, industry observers say.

What is happening is that consumers are looking a bit more closely at their wallets before making purchases. The trendy peanut butter is not as popular, while brands such as Jif and Skippy may be moving. The same could be said for the high-tech toothpaste or shampoo, while the traditional items in these categories, such as Colgate and Head & Shoulders, are getting second and third looks on the shelves.

Sensing the trend, suppliers are investing more money on promoting these items to the consumers. If nothing else, this trend shows that suppliers are still willing to spend money on advertising when they sense an opportunity with consumers.

A poor economy, consumer hesitation and an overall fear of the future are combining to get consumers focused on value. No one should be surprised. 
 
Seth Mendelson can be reached at 212-979-4879 or at smendelson@groceryheadquarters.com.

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