Consumer Nation

Published: Tuesday, 6 Oct 2009 | 2:40 PM ET

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Let the holiday price wars begin.

Target

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[TGT  Loading...      ()   ] is expected to announce that it will match toy price discounts put in place last week by rival Wal-Mart Stores

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(AP) Parents shop in the toy aisle at a Target store, Kingston, Massachusetts

The news is not surprising given that toys play a vital role in driving traffic to discount stores during the holidays, and most analysts are expecting consumers to be frugal this holiday season.

Wal-Mart's plans include offering 100 toys for less than $10. These toys include popular brands such as Transformers, Play-Doh, and Barbie.

Target has gone through this list and will match Wal-Mart's prices if it sells those items as well, said Tony Fisher, Divisional Merchandising Manager at Target. The company also is sending out a sales circular this week to shoppers that will include additional toys that will be getting price cuts of 25 percent or more.

Fisher said the promotion is part of its effort to emphasize Target's "low-price promise."

Although it may seem early for retailers to be going head-to-head on toy prices, Wal-Mart and Target weren't the first to start this battle. Toys 'R Us offered "Black Friday-like" price discounts as part of its "Christmas in July" effort.

Also, Sears is ratcheting up its focus on toys and got its holiday efforts off to an early start this summer.

So let the battle begin and brace yourself for more promotions ahead.

The National Retail Federation, which issued their holiday forecast earlier today, and said they expect to see aggressive price promotions this holiday season. In fact, prices in some categories, including electronics, may even be lower than they were year ago.

"Price is paramount," said NRF spokesperson Ellen Davis on the industry trade group's conference call Tuesday.

• Ho Ho Hum for Retailers, Holiday Sales to Fall 1% for 2009

According to Davis, consumers will continue to watch their spending closely and research their purchases carefully before they shop.

NRF also expects consumers to stick to the basics this holiday season. In apparel, that might mean jackets and jeans rather than cashmere scarves and sequined clutches. But for many parents, Christmas means there are toys that must be purchased.

Still, it's a challenge for retailers. If you are going to be selling 100 toys under $10, you will need to push a lot of inventory out the door to make up for the lush margins on pricey flat-screen TVs that dominated sales in Christmases past.

• Slideshow: Hot Holiday Toys

Although the NRF forecast offer retailers little holiday cheer, they have had a year to plan for this tough climate. Discounts this year are likely based on thoughtful planning rather than a knee-jerk reaction to push languishing inventory out the door.

And there are other strategies retailers are using. We're likely to see some savvy merchandising in the weeks ahead.

Also there has been a renewed focus on store brands. Target, for example, has been selling toys under its private label brands, Playwonder and Circo. Although this is a small slice of its overall toy business, the number of products it is offering under these brands are growing.

More from Consumer Nation:

• Toymakers Stress Value for the Holidays
• Stingy Santa Is Coming Back This Holiday Season
• Will a $10 Hamster Have Them Fighting in the Aisles?

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