Wal-Mart Fires Shot in Toy War

The Wall Street Journal

Retailer Cuts Prices After Learning Target's Are Lower

 

 

The annual battle for the minds and wallets of toy-buying parents has gotten off to a particularly fierce start, with Wal-Mart Stores Inc. slashing prices in an effort to keep Target Corp. from being the low-cost leader this holiday-shopping season.

Toys are key to many retailers' success at Christmas, because parents will buy stuff for their kids even when the economy is awful. But in recent years shoppers have tended to snap up the biggest toy bargains and ignore stores' other offerings.

This year, with economic conditions somewhat improved, retailers are hopeful that if they can lure parents with a great price on electronic hamsters or Stinky the Garbage Truck, shoppers will make other purchases. But store chains continue to feel the need to stake their low-cost claims just days after Halloween.

"It will still be a very competitive season for toys," said Craig Johnson, president of Customer Growth Partners, a retail and consumer consulting firm. "The reason you are seeing so much early discounting is that retailers are trying to get an early share of the market."

When the biggest retailers came out with their initial holiday toy prices shortly after Halloween, Toys "R" Us Inc. and Amazon.com Inc.—which is touting 25% off hot toys—telegraphed aggressive price cuts.

Amazon's toy prices are for the most part within the range of Wal-Mart, Target and Toys "R" Us, which also offer a variety of free-shipping deals on toys to compete with Amazon. Online toy purchases are rising but still make up a small percentage of all toy sales.

Wal-Mart was offering discounts on a broader selection than the bare-bones list of inexpensive toys it promoted last year. But in many cases its prices were higher than those advertised by archrival Target.

Shortly after The Wall Street Journal asked Wal-Mart last week about its price disadvantage, the company issued a new price list, slashing the sticker on many hot toys.

"This underscores our commitment to offer the lowest prices on top toys," Wal-Mart said in a statement.

With its newly announced prices, Wal-Mart beat Target on many toy prices by just a few pennies. But a few big spreads persist.

For example, Wal-Mart is now selling a Barbie doll embedded with a video camera for $39, or $6 less than Target. Meanwhile, Target has priced Stinky the Garbage Truck—a Matchbox truck that tells jokes—at $49.99, after a coupon, or $6 less than Wal-Mart.

Both retailers say that if a shopper presents them with a print ad featuring a lower price, they will match it.

But Target has a new, potentially potent price weapon that Wal-Mart does not: Shoppers get an extra 5% discount on all purchases, including toys, if they pay with a Target credit or debit card or the Target Visa card.

A much lower proportion of Wal-Mart's customers use credit cards of any sort. Wal-Mart's Discover Card gives buyers 1% back on purchases. As of yet, it has not matched Target's 5% discount.

Casey Carl, vice president of toys and sporting goods at Target, said, "We are doing things differently this year. We're expanding our discounts throughout the season."

Target is putting half of its 2,000 toys on sale this year, an increase of about 10% from 2009. The discounts released last week expire Nov. 24, but will be followed by other sales through the holidays.

"From everything we heard, Target was disappointed with their toy sales last Christmas and they seem to be coming out swinging harder and faster," said Eric Johnson, professor of management at Dartmouth College's Tuck School of Business.

Wal-Mart, meantime, is trying to convey that its toy section, which had shrunk by 30% in recent years, is expanding again, at least during the holidays. It also has more than quadrupled the size of its toy-oriented circular for newspapers, which this year has 52 pages.

In a departure from the last two years, when Wal-Mart emphasized toys for under $10 and $5, the retailer is touting popular toys across a range of prices. The most expensive item on Wal-Mart's top toy list is Big Foot The Monster, which walks, talks and burps, for $84.88.

"We've expanded the selection of toys and widened the array of price rollbacks," said Laura Phillips, Wal-Mart's senior vice president of toys and seasonal merchandise.

Ms. Phillips said that while Wal-Mart's price cuts will last through the season, competitors are expected to raise and lower their prices until Christmas. At rival stores, she said, "customers will have to chase sales."

Dartmouth's Prof. Johnson said he sees a shift in Wal-Mart's strategy. "They don't seem as intent on running everyone out of the toy business," he said.

The holiday selling strategy at Toys "R" Us goes beyond price, said Chief Executive Gerald Storch. The retailer is stocking a wider variety of toys in general and more exclusive toys, where it is not necessary to compete on price. The company, for instance, made a big bet this year on a line of miniature die-cast trains called Chuggington that aren't sold by Wal-Mart, Target or other big chains.

Toys "R" Us also holds events that bring products to customers ahead of the competition, such as Sunday's sale on merchandise involving teen heart throb singer Justin Bieber.

In addition, the retailer offers shoppers who enroll in a loyalty program 10% back on holiday purchases up to $500, via store credit. And the company has created an iPad app where children can create a wish list.

But that doesn't mean Toys "R" Us is ignoring its rivals' prices, Mr. Storch said, adding, "At any time, anyone can have the lowest price on a toy and we respond accordingly."

Target Grants $32,500 To Salvation Army

Inland Empire

 

The Salvation Army’s Hospitality House, which moved into a newly-renovated building in February, will soon see even more improvements, because a grant awarded by Target Corporation has recently increased to $32,500.

“We are grateful to be able to do even more to serve our homeless children and families, said Capt. Stephen Ball, director of the San Bernardino Corps of the Salvation Army.

The initial $25,000 grant awarded in 2009 allowed The Salvation Army to create an attractive media center and computer lab as it was renovating the new shelter building at 925 W. Tenth Street. These two rooms are primarily used by school-age children during a tutoring program, and as they complete their homework.

The grant required The Salvation Army use the money to renovate a library, media center or other educational facility.

Target actually awarded this grant to the Sierra del Mar Division (San Bernardino, Riverside, San Diego and Imperial counties) of The Salvation Army, which in turn awarded it to the San Bernardino Corps.

Target also awarded similar $25,000 grants last year to each of the 39 other geographical divisions of The Salvation Army’s worldwide ministry, some of which did not spend all of their grant funds. When more money became available, The Salvation Army reallocated some of it to the Hospitality House project in San Bernardino.

Capt. Ball said this additional $7,500 will allow the San Bernardino Corps to replace the doors on the media center and computer lab, renovate the adjacent bathroom with shower enclosures, and purchase additional books, educational software and educational DVDs for children.

“The new doors will have small viewing windows for better safety and supervision, and will replace old wooden doors that were left in place during the building renovation,” Capt. Ball said.

“Additional California bathroom renovation will widen the doorways making them easier to access,” he said. “We weren’t able to do much with these two bathrooms last year because renovating the bathrooms in the guest rooms was a higher priority. We will replace a drinking fountain in the center as well.”

The original $25,000 grant allowed The Salvation Army to equip two poorly-lit rooms with good lighting, attractive tables and chairs for study and television viewing and eight computer stations, Capt. Ball said.

About the Salvation Army San Bernardino Corps
The Salvation Army may be able to provide emergency services including food; lodging for homeless or displaced families; clothing and furniture; assistance with rent or mortgage and transportation when funds are available. The Salvation Army Team Radio Network assists rescue workers and evacuees in such disasters as fires.

Target Discovers Downside to Political Giving

The Wall Street Journal

 

Target Corp. sought to take advantage of new campaign-finance rules, but ended up putting a bull's eye on its back.

The Minneapolis retailer recently donated $150,000 to a political group, Minnesota Forward, that backs pro-business candidates in statewide races, including a candidate for governor who opposes same-sex marriage. On Friday, hundreds of gay-rights supporters demonstrated outside Target stores in locations nationwide, and a petition promising a boycott, signed by more than 240,000, was delivered to Target.

The Target flap shows the potential downside for companies that want to get more involved in politics since a January Supreme Court ruling on campaign contributions. Brand-oriented companies, in particular, worry about getting embroiled in controversies that can tarnish their reputation. It is a rare political black eye for the trendy discounter, which has a track record of supporting gay causes, including extending partner health benefits to its employees.

The campaign against Target was orchestrated by liberal-advocacy group MoveOn.org. It included a note on the retailer's Facebook page that said, "Boycott Target Until They Cease Funding Anti-Gay Politics."

"We made Target the target," said Ilyse Hogue, the group's director of public advocacy. Ms. Hogue said MoveOn and its members plan to gin up bad publicity for any company venturing into political campaigning.

Target Chief Executive Gregg Steinhafel apologized in a letter to his employees Thursday, a day before the protests. "The intent of our political contribution to MN Forward was to support economic growth and job creation," he wrote. "While I firmly believe that a business climate conducive to growth is critical to our future, I realize our decision affected many of you in a way I did not anticipate, and for that I am genuinely sorry."

Target declined to address the question of whether it would withdraw the donation.

The January Supreme Courtruling, known as Citizens United, loosened restrictions on corporate and union activity in elections. The court said these entities could dip into their treasuries to pay for ads supporting or opposing candidates. Previously, they were prohibited from paying for ads directly, and could use only funds contributed by employees or members.

Democrats blasted the ruling, saying it would lead to a gusher of donations that would give companies disproportionate influence in elections. Republicans called it a win for free speech.

Despite the ruling, most corporations remain reluctant to donate money to outside political organizations. People involved in politics say most companies remain risk-averse, worried about what would happen if they supported the loser. Labor unions remain larger contributors to elections than corporations.

"It's harder to get corporations to do this than a lot of people thought it was going to be," said Vin Weber, a former Republican lawmaker from Minnesota who is now a lobbyist and political consultant. "People think that most businesses are Republican, but by and large, companies don't think that it makes much of a difference which political party controls Washington."

Minnesota Forward was created in the wake of the court decision precisely to collect donations from corporations. Established in part by the Minnesota Chamber of Commerce, it is funded by a handful of companies in the state, including Target, Best Buy and snowmobile-maker Polaris Industries.

"The group decided to create Minnesota Forward to put jobs and the economy at the top of the agenda during the 2010 campaign," said Brian McClung, who runs the organization. "We think it's appropriate that the business community weigh in about the best candidates."

Polaris didn't return a call for comment. Best Buy spokeswoman Sue Nehring Busch said: "Our political giving strategy is based solely on the need to help elect candidates who will make jobs and economic issues a top priority this election."

The organization isn't overtly partisan. It announced Thursday that it would support three GOP and three Democratic candidates in the state. Earlier, the group backed Republican gubernatorial candidate Tom Emmer, who supports a constitutional amendment protecting "traditional marriage."

Mr. McClung said his group picked candidates based on their fiscal, not social, positions. He said Minnesota Forward had raised about $1 million for its campaign and had pledges for about $1 million more.

The Target skirmish is likely to be the first in a series heading into the November elections. The court decision was a "watershed event for our members," said Ms. Hogue of MoveOn.org.

Ms. Hogue said MoveOn.org wouldn't let up until Target stops "meddling in our elections."

Mr. McClung responded: "We all lose when activists think they can shut down legitimate speech they disagree with."

Target Puts Mobile Coupons on Customer Cell Phones

USA Today

Using your cellphone during checkout at Target could soon earn you discounts.

Starting Wednesday, the giant retailer will allow customers to take advantage of special mobile-coupon offers on their handsets.

The coupon is redeemed when the bar code on the phone is scanned at checkout. Offers are good only once and expire on the dates listed. "We believe it's a competitive advantage for us," says Target.com President Steve Eastman.

Target (TGT) says it will be the first major nationwide retailer to exploit the bar-code technology in all its stores. It almost certainly won't be the last.

For example, J.C. Penney is testing similar scanner-based technology at 16 point-of-sale registers in Houston. But at the rest of its stores, checkout clerks still must manually enter alphanumeric codes tied to discount coupons, rather than using scanners.

Scanning bar codes makes the process faster and easier, says Dan Kihanya, vice president of consumer marketing at Cellfire, the mobile-coupon company working with J.C. Penney on its Houston tests. "Any time you have data entry, you have to worry about errors."

Mobile coupons, while not new, are still in their relative infancy. "It's an area ripe for growth," says ABI Research analyst Neil Strother. Not everyone clips coupons, virtually or otherwise. But most people crave a bargain when the economy is tough. And coupon technology works with more and more cellphones.

U.K.-based Juniper Research recently forecast that more than 1-in-10 mobile subscribers in developed regions around the world will use mobile coupons by 2014, generating nearly $6 billion in redemption value.

Kihanya of Cellfire says mobile coupons are redeemed at a 5% to 20% rate, compared with about 1% for print coupons. Cellfire does much of its business with grocery chains, such as Kroger and Safeway.

Shoppers interested in Target's program must "opt in" by registering at the company's online or mobile websites, or by texting the word "COUPONS" to 827438. Opting in addresses privacy concerns, Target says. Once registered, shoppers receive a text message on their phones with a link to a mobile Web page with various offers, which can all be accessed through a single bar code. Target says the program works with any phone that has a browser and data plan.

New coupons will be issued on a monthly basis as older ones expire, although the number and frequency may evolve as the program expands. The coupons cannot be used on Target.com.

Currently, coupons are not tailored to the interests of specific customers, although it is something Target is considering as part of its mobile SEO program. "If privacy becomes an issue, we'll make an adjustment," Eastman says.

Target profit falls but beats Wall Street view

By The Wall Street Journal

SAN FRANCISCO (Reuters) - Target Corp (TGT.N) reported its eighth consecutive drop in quarterly profit, but the results were better than Wall Street had expected as the No 2 U.S. discount retailer cut costs and stocked less merchandise.

Target said profit was $594 million, or 79 cents per share, for its second quarter ended August 1, compared with $634 million, or 82 cents per share, a year earlier.

Analysts, on average, had been expecting it to earn 66 cents per share, according to Reuters Estimates.

Sales fell 2.7 percent to $14.6 billion, while sales at stores open at least a year, a key retail gauge known as same-store sales, fell 6.2 percent.

Shares rose to $43.60 in premarket trading on Tuesday after closing at $41.38 on the New York Stock Exchange on Monday.

(Reporting by Nicole Maestri, editing by Gerald E. McCormick)

Target Completes Change at Top

As posted by: Wall Street Journal

Target Corp. said Chairman Bob Ulrich will retire at the end of the month, and will be succeeded by Chief Executive Gregg Steinhafel, completing a transition that began when Mr. Steinhafel was tapped for his current post a year ago.

Mr. Ulrich will become chairman emeritus, the retailer said.

The 53-year old Mr. Steinhafel joined Target in 1979 and became president in 1999. Target announced last January that he would succeed Mr. Ulrich as CEO, although he didn't take the reins until May of 2008. He was named to the board two years ago.

Mr. Ulrich has spent his entire 41-year career at Target and its predecessor company, Dayton's, starting as a merchandise trainee. He became its president in 1984 and chairman and CEO three years later. Mr. Ulrich is credited with creating Target's "cheap chic" marketing strategy some 20 years ago.

Like so many other retailers, Target has been struggling with slackening sales as shoppers rein in discretionary spending in the face of the housing-market collapse, the financial-markets meltdown, gyrating gasoline prices and tight credit. Target has large lawns that may require Lawn Care.

Last week Target said its December same-store sales fell 4.1%, in line with its expectations. But it said that markdowns "pressured profits."

In addition to slowing sales, Target's profit has suffered as an increasing number of its shoppers default on credit-card payments.

"We are completely confident in Gregg's leadership and his ability to build on Bob Ulrich's legacy," said Vice Chairman Jim Johnson.

Target Settles With Blind Group on Web Access

Target Corp., as part of a class-action settlement with the National Federation of the Blind, agreed to pay $6 million in damages to plaintiffs in California unable to use its online site.

The settlement, announced Wednesday, also requires Target to implement internal guidelines to make its site more accessible to the blind by Feb. 28, 2009, with assistance from the NFB.

The retailer and federation have agreed to a three-year relationship during which the advocacy group will keep testing the site to make sure it is accessible to blind people who use technologies such as screen-reading software. NFB said it will certify the site through its own certification program once the improvements are completed.

Under the financial portion of the settlement, Target will place $6 million in an interest-bearing account from which members of the California settlement class can make claims.

The issue centers on the Americans With Disabilities Act, a 1990 law that requires retailers and other public places to make accommodations for people with disabilities. Target had argued that the law covered only physical spaces.

"We feel that it is a wake-up call to companies that have Web sites that are selling goods and services," said Christopher S. Danielsen, a spokesman at the NFB. "They need to pay attention to accessibility." He also pointed out that the benefits of attracting new users far outweigh the costs of making changes to the site.

Mr. Danielsen noted that when the suit was filed two years ago, Target's site was more difficult to navigate than other sites, such as Walmart.com. He noted that at the time, many links on Target's site were unintelligible to screen-reading software, which converts written words into speech. He added, however, that Target has made progress, and said the advocacy group looks forward to working with Target to make additional improvements.

Steve Eastman, president of Target.com, said that "as the company's online business has evolved, we have made significant enhancements in order to provide an accessible shopping experience." He added that the company will work with the NFB on refinements to the Web site.

Associated Press
Wall Street Journal; August 28, 2008