NEW YORK – A shorter holiday selling season and a financially strapped customer base led Walmart to mount Thanksgiving weekend events that were aggressive even by the discounter’s standards.
While some analysts dismissed the company’s preholiday pronouncements as “bluster” (Aram Rubinson, Wolfe Research), “transitory” (David Strasser, Janney Montgomery Scott), and part of the seasonal “noise” (Stephen Baker, The NPD Group), they nonetheless reverberated through retail and rattled Best Buy and Target. Both chains pointed to the likelihood of lower fourth-quarter profits as a result of the higher promotional stakes.
Walmart made its intentions clear last month after reporting meager net sales gains of 1.6 percent and flat U.S. comps in the third quarter. On an earnings call, outgoing CEO Mike Duke acknowledged, “Our most important priority is growing top-line sales, including comps … The retail environment, both in stores and online, remains competitive. At the same time, some customers feel uncertainty about the economy, government, jobs stability and their need to take care of their families through the holidays. Walmart has aggressive plans to help our customers enjoy the holiday season … while maximizing their budgets at the same time. There is no doubt that we plan to win for our customers and shareholders throughout the holidays.”
Walmart U.S. president Bill Simon also laid down the gauntlet when he declared that “Black Friday is our day — our Super Bowl — and we’re ready to prove once again that no one does it better.”
Indeed, the company said it had amassed its largest-ever Black Friday inventory, including twice as many tablets and 65 percent more TV SKUs than last year. Moreover, Walmart guaranteed in-stocks for one hour on 21 different items during three separate sales events on Thanksgiving and Black Friday. Doorbusters included a 32-inch, 720p off-brand LED TV for $98; 16GB Apple iPad Minis with a $100 gift card for $299; a 14-inch HP Pavilion TouchSmart laptop for $278; and a 7-inch RCA dual-core tablet for $49.
The chain raised the competitive holiday stakes still further by lowering its minimum online order for free-shipping from $50 to $35, equaling Amazon.com’s, and by matching Black Friday prices from Best Buy, Target and Toys“R”Us on select CE and toys fully 10 days before Thanksgiving. Targeted items included a 50-inch LG TV that was available for $448, down from $598, and select PlayStation 4 and Xbox One game titles for $49, down from $59.96.
In a research note titled “Walmart Has Officially Gone Cuckoo On Promotions,” analyst Strasser observed, “Walmart is going to do whatever it takes to drive a positive Q4 comp, as the company has essentially turned the entire week leading up to Thanksgiving into Black Friday … [and] stepped up the promotional cadence to an unprecedented level.”
He added, “It’s those that don’t fear the behemoth that will be sorry come Thanksgiving.”
Walmart’s warning shots weren’t lost on Best Buy, which cautioned that competitive pricing and Thanksgiving Day store openings will likely impact fourth-quarter earnings.
“As we enter the fourth quarter, we are also highly aware of the public statements that are being made by our competitors as it relates to their promotional plans for Black Friday and the fourth quarter,” said Best Buy chief financial officer Sharon Mc- Collam on a third-quarter earnings call. “We know that we will be facing an increasingly promotional environment.”
But despite an anticipated gross margin hit, McCollam was adamant that “first and foremost, we are committed to being competitive on price … it is table stakes in our transformation. So if our competition is in fact more promotional in the fourth quarter, we will be too.”
To that end, Best Buy “reaffirmed its holiday price competitiveness strategy” with its own slate of pre-Black Friday doorbusters and a limited holiday price-match guarantee. The goal, the company said, was to neutralize price and timing as a buying factor. Early deals included a 32-inch Toshiba TV for $200, a 50-inch Vizio TV for $450, and free Galaxy S3 16GB smartphones with two-year activations.
Like Walmart, Target is feeling the pinch from a cash-constrained customer. “We continue to see anxiety regarding the economy and the ability to stay within household budgets, particularly among lower and middle income consumers,” reported Kathryn Tesija, Target’s merchandising and supply chain executive VP. On an earnings call, she cited customer surveys showing that “a meaningful portion” of customers were changing their shopping behavior in light of their financial situation, and even cutting back on store visits “for fear they would be tempted to spend too much.”
“In light of this environment, we’re entering the holiday season with a cautious outlook for sales and a very liquid inventory position,” she said.
This year the promotional focus is on CE and toys, noted Target chairman, president and CEO Gregg Steinhafel, where the No. 2 discount chain is investing more merchandising and marketing resources based on last year’s results. “In particular,” he said, “given our market share in video game hardware and software, we expect to benefit this holiday season from the most meaningful platform launches in more than seven years.”
Tesija went further, projecting that gaming would be one of the biggest gifting categories of the year, and described Target’s CE business as “really strong right now,” led by “fantastic” performance in fashion headphones like Beats by Dr. Dre and wireless speaker systems like Sonos.
To encourage shoppers to spend, the chain opened an hour earlier than last Thanksgiving, at 8 p.m., “to help accommodate our guests and remain competitive in the marketplace,” she said. Hundreds of doorbuster deals included Target’s lowest prices ever on CE, she noted, such as a 40-inch Element LED TV for $270, Beats by Dre Solo HD headphones for $119, and a 16GB iPad Air Wi-Fi for $479 plus a $100 Target gift card. The company also ran 15 daily online-only deals for two weeks beginning Nov. 24.
Nearly lost in all the Black Friday hubbub was Amazon.com, the other 800-pound gorilla of retail. The e-tailer heightened the holiday creep by launching an eight-day promotional barrage the Sunday before Thanksgiving that was punctuated by machine-gun flash deals released in 10-minute intervals. CE specials included a 50-inch 1080p, 60Hz Seiki LED TV for $229; a 65-inch 1080p, 120Hz Samsung LED TV for $999; and the HTC One smartphone for 1 cent with a two-year contract. The e-tailer also created a curated CE holiday gift guide site, began limited Sunday deliveries with the U.S. Postal Service, and launched a mirror site, Smile.Amazon.com, which donates 0.5 percent of the purchase price to a charity of the buyer’s choice.
In the end, at least one popular shopping advice site, BradsDeals.com, pointed to the Big Three of CE, Best Buy, Walmart and Amazon, as the “winners” in the Black Friday wars. Based on its analyses of more than 150 Black Friday circulars, the site determined that Walmart had the most “best deals,” followed closely by Best Buy, with Amazon placing third.
Top 10 Black Friday CE/Majaps Deals
1. Apple iPad Mini: $199 ($299 plus $100 gift card), at Walmart
2. 32-inch tier-three LCD TV: $98, at Walmart
3. iPhone 5c: $45 plus a free $75 gift card, at Walmart
4. Amazon Kindle: $49, at Best Buy
5. Kenmore washer and dryer pair: $499, at Kmart
6. 13.3-inch Macbook Pro with Retina Display: $1,099, at Best Buy
7. LG 55-inch LED 1080p TV: $499, at Best Buy
8. Seiki 32-inch LED TV: $98, on Amazon.com
9. Seiki 50-inch LED TV: $229, on Amazon.com
10. Vizio 60-inch smart LCD TV: $688, at Walmart
Source: BradsDeals.com, a retail sale curating site, based on analyses of more than 150 Black Friday circulars and ads. © TWICE 2013