Walmart Aims for Domination with $8 Zhu Zhu and iPod Deals, yet Irony Strikes Target

Walmart (WMT) is hammering away at its two major holiday promotional obsessions, toys and electronics, but it's still keeping its impulse to discount under careful control.

The retailer's latest promotional theme is good things in small packages. The most recent in a series of Saturday promotional launches, the new deal it is offering includes the hottest toy of this particularly holiday season, the Zhu Zhu hamster. That particular element in the promotion actually kicks in on Monday and continues through Wednesday. With it, Walmart is undercutting the manufacturer suggested $10 price on the scurrying toys and offering them for eight bucks. But there are caveats.

The Zhu Zhu toys, the retailer relates, become available at Walmart stores, and in stores only, beginning 7 a.m. on Monday. Lines and ticket distributions for purchase begin beforehand. Store allotments will vary from a minimum distribution of 20 to more than 60 per day for most locations on each day. Walmart will provide no rain checks.

Given their quantity, it's evident that the Zhu Zhu hamsters are a primarily a promotional vehicles. Yet they provide Walmart a chance to tout a range of $8 toys it is making available starting Saturday as a late holiday season topper to its 100 Toys for $10. As we noted in this blog, discounts are starting to get deeper now as retailers go after consumers who they recognize are holding out for lower prices.

Recently released research from American Express indicated that 66 percent of consumers still had shopping to do a month before Christmas, with 31 percent saying they were holding out for better deals. Further, 21 percent of consumers said they expected to continue shopping through the week before Christmas

Given those results, Walmart seems on the money with the $8 toys, including the Jenga Hand Held game, Barbie Fashionista Doll, Nerf-n-Force Sword and Little Pet Shop Deco pets, coming Saturday.

Walmart's toy strategy gives every appearance of working. In a season when 54 percent of consumers are shopping a toy store based on price, according to a BIGresearch study, 23 percent of consumers said they are shopping Walmart most often, ahead of Toys"R"Us at 16 percent, Target at eight percent, Amazon at two percent and Kmart at one percent.

On the electronics side, starting Saturday, Walmart is providing a $50 iTunes gift card with the purchase of the new $145 eight-gigabyte iPod Nano. Again, Walmart warns that the deal is good "while supplies last," but said it's scheduled to keep on running through Dec. 24. So are related deals including $4 DVDs, $10 video games and $19.96 Blu-ray disks.

Walmart noted that 40 percent of moms plan on adding gift cards to Christmas stockings this holiday season, citing more BIGresearch data, and 45 percent intend to purchase music, which hints at the retailer's promotional purpose as regards the iPod. Of course, Walmart has been giving its own gift cards away as incentives in electronics promotions, forcing consumers to spend their savings in its outlets. However, in this case, the retailer is appealing to the stocking stuffer purchaser, who is mom after all, with stocking-sized gifts that have attached names she knows will excite her kids. From another perspective, the focus on a $145 iPod also suggests that Walmart is convinced it is selling to some fairly affluent consumers this holiday season.

An irony hovers over the iPod deal, however. Target (TGT) recently struck a deal with iTunes, which now operates a Target section in its online store offering some exclusive music, including a little something from Pearl Jam. So not all electronics-related gift cards that Walmart hands out this holiday season will be redeemed at its stores. Some may be redeemed with Target, or at least the retailer's iTunes manifestation. After the non-stop promotional punishment that Walmart has handed out this holiday season, Gregg Steinhafel, Target's CEO, must relish that possibility.