Toys under pricing scrutiny

Competition in the toy category is intense every holiday season, but it seems to have been ratcheted up a few notches this year, and Target was one of the companies doing the ratcheting. The company’s aggressive pricing moves put it in close proximity to Walmart early in the season and more recently Target’s toys were less expensive than Walmart’s, according to a pricing survey conducted by Citigroup retail analyst Deb Weinswig.

“Target has promoted a consistent value message throughout the season and we believe the company has the lead as we approach Dec. 25,” Weinswig wrote in a research report last week. “We performed our third toy pricing survey of the season and for the first time, Target was priced lower than Walmart on our basket of toys, even without including the 5% rewards discount!”

Weinswig noted that Target had narrowed and reversed the pricing gap with Walmart over the course of the holiday season to the point where Walmart’s basket of toys is now 70 basis points more expensive than Target’s compared to 180 basis points cheaper when the survey was first conducted on Oct. 21.

“Also, if you apply Target’s 5% Rewards discount, the basket becomes 600 basis points more expensive at Walmart versus 340 basis points pricier in our 1st survey,” according to Weinswig.

Walmart’s toy pricing has been the subject of considerable scrutiny this season with Eric Johnson, director of the Center for Digital Strategies at Dartmouth’s Tuck School of Business, calling the company a non-player in the toy category in a Bloomberg article.

“Most of their hot toys are out of stock and the stuff that is there is not low-priced,” Johnson was quoted as saying in the Bloomberg article on price adjustments that took place at Walmart following Thanksgiving weekend.