story by Kim Souza
ksouza@thecitywire.com
The back-to-school sales are not even in books yet and retailers from Wal-Mart to Toys R Us are already unveiling new incentives to woo holiday shoppers.
Wal-Mart Stores Inc. said Wednesday (Aug. 22) at the retailer’s annual holiday meeting in Orlando that it ditched the $5 layaway set-up fee this year and will give its Facebook fans a 2-day head start on holiday layaway beginning Sept. 11. In prior years, Wal-Mart refunded the start-up fee with a gift card when the layaway paid in full. This year the program is free, no strings attached.
That said, layaway cancelations will incur a $10 charge this year, except in the states of Ohio, Maryland, Rhode Island and the District of Columbia. There was no cancelation charge in 2012.
The program officially kicks off Sept 13 and runs for 90 days and will operate similarly to last year, absent the set-up fee.
“Times are tough and it’s not easy for many Americans – they are watching every penny,” said Duncan Mac Naughton, chief merchandising officer for Walmart U.S. “All year long, but especially during the holidays, our customers need a low price leader. This year, we are committed to doing everything we did last year to help Americans save money – plus more. More savings, more layaway items and our commitment that they can give their families a great Christmas on a budget."
Wal-Mart said there are 35,500 eligible layaway items this year, up by about 1,000 items from a year ago. This year’s eligible merchandise includes Apple’s iPad, the Samsung Galaxy and PlayStation 4, as well as toys, jewelry, small appliances, select sporting goods and automotive stereo and speaker systems.
The retailer phased out its layaway plan in September 2006 — roughly a year before the recession began — with the exception of jewelry. But Wal-Mart brought back the program for the holiday season in 2011 and said it’s been widely used by its customer base.
Toy giant Toys R Us is expanding its price match guarantee this holiday season to include online pricing from Wal-Mart, Target, Best Buy and Amazon on identical in-store items.
"We want to take away any concerns our customers might have about maximizing their budgets," said Toys R Us Chief Merchandising Officer Richard Barry.
Getting customers into stores is more than half the battle for retailers during the important holiday season. Analysts estimate holiday sales can account for 40% of a retailers total annual revenue.
Wal-Mart, Target, Macy’s and other retailers recently reporting earnings have given cautious outlooks, trimming sales and profit estimates for the balance of this year. Walmart U.S. CEO Bill Simon said recently that the consumer is still quite value- conscious. He added that consumers will likely spend for the holidays, while they may cut back on other things between now and then. Target executives said Wednesday (Aug. 22) their shoppers may have been willing to dole out for large-ticket items like new cars in recent months, at the expense of other discretionary spending.
Lori Cross, analyst with Cross Ledge, said there is plenty of evidence that consumers are spending more on big ticket items from robust auto sales to Home Depot’s recent note that the “$900 and up projects” rose 15% from a year ago for the big box giant.
“That’s equal to lots of smaller trips not taken to Wal-Mart or Target,” she said.
Other analysts agree the higher payroll taxes which took effect in January to the tune of $1,000 a year for households earning $50,000, are still being felt by some consumers. They said consumer income has also been dinged by rising health insurance costs and stagnant wages.
“Let’s hope by the end of this year, consumers are figuring out how to adjust to those higher taxes,” said Courtney Reagan, retail analyst with CNBC.
Last year holiday shoppers spent almost $579 billion, rising 3% from the prior year. A holiday survey by Baynote found 60% of retailers are forecasting revenue growth of 10% for the 2013 holiday season.
The report also suggests that 30% of retailers will begin their pre-holiday promotions prior to October 1, with more than 40% waiting only until early November.
"We wanted to take the pulse of the retail industry as it prepares for the 2013 holiday season and gain a deeper understanding of how marketers plan to increase holiday season revenue and profitability," said Dan Darnell, VP of marketing and product, Baynote. "The inaugural survey provides a benchmark for retailers finalizing promotional strategies for the upcoming holiday season.”
The survey also revealed that most retailers believe shoppers will spend later in the year, despite their efforts to price match and provide extended layaway programs.