In the retail world, Mike Duke isn’t this year’s Santa Claus, nor is Gregg Steinhafel. Rather, the red suit belongs to Amazon’s (NASDAQ:AMZN) very own Jeff Bezos, and it is all thanks to his little elves at the company’s toy factories.
The holiday shopping season has always been a retail gold mine for big-name companies like Wal-Mart Stores (NYSE:WMT) and Target (NYSE:TGT), but this year, the competition has been especially fierce because the brick-and-mortar retailers are suffering struggling sales on account of new competition presented by e-commerce giants like Amazon.
Wal-Mart and Target have worked to combat this new rival by shoring up their Internet offerings and marketing enticing online deals, but a new report from Bloomberg shows that despite their best efforts, it still isn’t enough, because Amazon has a more impressive online availability of toys than Wal-Mart or Target do.
According to a December 12 Bloomberg Industries study measuring the online availability of a basket of 100 toys, Target had only 40 percent of the items in stock online, while Wal-Mart had 55 percent, and Amazon had 95 percent. Of the 20 toys Wal-Mart had on its hot toy list in September, a solid 12 were unavailable two weeks before Christmas, while the same in-demand toys could be found on Amazon’s website. This year marks the second year in a row that Amazon has outmatched its competitors for in-stock availability, a report that doesn’t bode well for brick-and-mortar retailers in the future.
Things have already been tight in the retail world this holiday season, because industry researchers like ShopperTrak and the National Retail Federation only expect holiday sales to rise 2.4 percent this year, the weakest since 2009. According to Bloomberg, retailers depend on the lucrative fourth quarter to account for about half of their annual toy sales, so Wal-Mart and Target are already bracing themselves for this year’s totals if holiday sales don’t go well.
The problem for Wal-Mart and Target is that the Bloomberg report shows the two companies are now essentially forcing toy shoppers to turn to Amazon if they want to do their kids’ Christmas shopping online. Though the two companies have toys in stock in their physical stores, many consumers now shop exclusively online, so if products aren’t available on Wal-Mart and Target’s website, shoppers won’t be visiting their brick-and-mortar stores — they’ll just visit Amazon.com.
Amazon is able to stay sufficiently stocked because it has recently increased its investment in warehouses that hold the items that can easily be shipped quickly to buyers, no matter where they are located. That means products are always available regardless of consumers’ locations, so if shoppers can’t get some of their toys elsewhere, they can always count on Amazon to do the job.
Now that retailers are in the final stretch of the holiday shopping season, there is not much they can do to make up for what has already been lost, but places like Wal-Mart and Target will still need to continue improving their online offerings. We won’t know just how well each company has fared until earnings are released later in the new year, but one thing is certain: Wal-Mart and Target could find themselves on this year’s naughty list.
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