Holiday Shopping Price War Ramps Up

Holiday Shopping Price War Ramps Up

Holiday Shopping Price War Ramps Up

$AMZN, $TGT, $WMT

Wal-Mart Stores Inc. (NYSE:WMT), Target Corp.(NYSE:TGT) and other brick-and-mortar chains are counting on heavier discounts and a bigger online selection to help keep up with Amazon.com (NASDAQ:AMZN). this Holiday shopping season.

As Black Friday ushers in the year-end shopping rush, chains are touting larger price cuts than in Y 2015 strategizing that maintaining market share is worth squeezing margins.

Based on a Market Track study of holiday circulars, Wal-Mart is offering an average discount of 39%, compared with 35% last year. At Target, the price cuts grew to 38% from 36%.

Wal-Mart and others also are steering customers toward online deals, rather than just physical stores. While the chain still offers Black Friday specials at its Supercenters, the day marks the beginning of a streak of online promotions called “Cyber Week.”

Wal-Mart has 3X’d its e-Commerce selection to 23-M products this year, aiming to better compete with Amazon.

Target is offering 15% off almost everything in its stores and website for 2 days: Sunday and Monday.

The aggressive discounts come at a cost.

When Target slashed prices last holiday season, its profit margin slipped to 27.9% from 28.5%.

The National Retail Federation (NRF) estimates that about 137.4-M consumers will make purchases in stores or online over the 4-day weekend that started on Thanksgiving. But the amount that Americans have spent has declined in the past 3 years, slipping 26% from Y 2013 to an average of $299.60 per person in Y 2015.

That is a sign that holiday purchases are spreading out over a longer time frame. Spending during the overall season, November and December is still expected to grow 3.6% to $655.8-B, the NRF estimates.

With Americans shifting their purchases online, the urgency of offering deals on Black Friday itself has diminished. EBay Inc. made a plea for consumers to start shopping on their phones the day before Thanksgiving, christening the event “Mobile Wednesday.”

One thing giving retailers optimism this year: There may be pent-up demand after the Presidential election. Many chains, including Kohl’s Corp., Gap Inc. and Barnes & Noble Inc., blamed the campaign season for hurting spending. With the outcome settled in Donald Trump’s favor, they expect the USD’s to flow.

Historical studies indicate that elections affect the timing of retail sales rather than the overall volume. That means shoppers will usually spend the same amount, even if the election puts them off spending for a while.

The challenge for traditional retailers is preventing consumers from becoming “locked in” at Amazon. Many shoppers begin their product searches there, and never leave.

No matter when they shop, customers will be hunting for bargains.

While a survey of about 1,000 US consumers by AlixPartners indicated that 83% of shoppers expect to spend about the same or more this Holiday season, mobile phones are making price comparisons simpler than ever.

HeffX-LTN Analysis for AMZN: Overall Short Intermediate Long
Neutral (-0.06) Neutral (-0.07) Neutral (0.10) Neutral (-0.22
HeffX-LTN Analysis for TGT: Overall Short Intermediate Long
Bullish (0.43) Very Bullish (0.50) Bullish (0.48) Bullish (0.31)
HeffX-LTN Analysis for WMT: Overall Short Intermediate Long
Neutral (0.09) Neutral (0.14) Neutral (0.06) Neutral (0.07)

Have a terrific weekend.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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