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Retailers expect $10 and under gifts to drive store

traffic

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Cheaper gifts are aimed at cash-strapped consumers

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Lower prices could drive impulse purchases

By Jessica DiNapoli

NEW YORK, Dec 19 (Reuters) - Retailers including Target ( TGT )

and Walmart ( WMT ) are stocking shelves with more toys

and gifts such as Barbies that cost less than $10 this holiday

season, a strategy aimed at attracting cash-strapped shoppers.

For retailers and toymakers, selling a bounty of cheaper

gifts aimed at consumers earning $50,000 or less helps boost

volumes and sales in the key holiday period that is five days

shorter than last year and forecast to be lackluster.

The merchandising plan also helps cushion profits because

discretionary goods, like toys or clothes, have richer margins

than consumable items such as food, which shoppers, especially

low-income ones, are spending more of their money on due to

inflation.

U.S. inflation has been persistently high, with grocery

prices, and eggs in particular, soaring.

Privately-held Bratz doll maker MGA Entertainment is

seeing 60-70% of its sales come from toys priced $10 and under,

said CEO Isaac Larian. Its Miniverse figurines - listed as top

toys by retailers including Target ( TGT ) and Walmart ( WMT ) - are mostly

under $10.

"The consumer is very, very stretched, and they're going

to be frugal," Larian said. "A kid who is going to get four to

five toys (in the past), maybe will get two to three this year."

MGA has 625 toys out of 2,500 that retail at $10 or below,

Larian said.

Discounter Five Below ( FIVE ) - named for its primarily $5

and under merchandise - is "leaning into value even more this

holiday season with $1, $2 and $3 items," chief operating

officer Kenneth Bull told investors this month.

The retailer is selling squishy Hello Kitty collectible

figurines for $3.25 and $1 candles and gift wrap. The

ultra-cheap items are working to attract customers, Bull said,

even though the retailer is expecting a sales decline in its

fourth quarter, which covers November and December.

Walmart ( WMT ) and Target ( TGT ) are also promoting $10 buys. Walmart ( WMT ) has

positioned Procter & Gamble's ( PG ) Old Spice HoliDude soap and

deodorant gift sets in Lumbersnack and SnickerDudel scents in

attention-grabbing locations, according to a research note from

brokerage D.A. Davidson.

Merchandise costing $10 and under could lead to customers

buying cheaper items than they initially planned, lowering sales

and pinching margins, said Barry Thomas, a senior global thought

leader at marketing data provider Kantar.

The low-cost items may also encourage shoplifting,

because thieves can easily grab the products and walk out, he

said.

The stores are also highlighting $5 and $10 deals on

Mattel's ( MAT ) Barbie dolls, according to D.A. Davidson. A

Barbie priced $10 or less usually has fewer accessories or wears

simpler clothing than a higher-priced doll.

"$10 is a price point that has psychological power," said

Thomas, adding that $10 is low enough for consumers to try

something new. "It's low risk. From the retailer's point of

view, it's seen as driving basket size. It's an impulse price

point."

To be sure, retailers have long promoted low-cost and

heavily-discounted gifts during the holidays in an effort to

increase sales during the biggest selling season of the year.

But the deals this year aim to encourage greater spending by

penny-pinching low-income consumers, whose buying so far lags

their wealthier counterparts.

Consumers earning less than $50,000 are planning to spend an

extra $87 this holiday season, or 12% more than last year. Those

earning between $100,000 and $199,000 are planning to spend $379

more than last year, or 17%, according to accounting firm

Deloitte.

In the two weeks around Thanksgiving, low-income consumers

fell behind on buying compared to middle- and higher-income

shoppers, according to Bank of America credit card data.

In a sign of how retailers are rearranging their merchandise

to cater to cash-strapped shoppers, the average price of

Walmart's ( WMT ) 70 top toys was 10% lower than last year's, at $40.16,

according to D.A. Davidson. The average price on Amazon's ( AMZN )

top 389 toys was 3% lower, according to the brokerage.

A Target ( TGT ) spokesperson said the retailer intentionally

increased its allotment of toys under $20.

Latrina Begley of Nashville, who is on a tight budget, said

she plans to do her holiday shopping in-store, where

prominently-displayed $10 deals may catch her eye.

Only 40% of consumers earning less than $50,000 per year

plan bought online in the five days after Thanksgiving, compared

to 60% of those making more than $100,000, according to the

National Retail Federation, a U.S. trade group.

"I prefer to go into a store, I have a better view of what

I'm buying," said Begley, who was planning to visit stores such

as Target ( TGT ), Walmart ( WMT ), TJX's Marshalls and Ross.

"(Buying online), you have to worry about shipping."

Shoppers at the largest U.S. dollar store Dollar General ( DG )

, who largely earn less than $35,000 per year are shifting

their spending to necessities like food, pinching the retailer's

profits.

But, Dollar General ( DG ) is discounting toys, gadgets and holiday

decor to entice more buying, executives said.