Black Friday cage match: Wal-Mart vs. everyone

Wal-Mart fired up its discount engine early; many malls are kicking off midnight sales. Will shortages of hot products put shoppers in a bad mood?

By Parija B. Kavilanz, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Holiday shoppers will see a clearly defined battle line this Black Friday: Wal-Mart on one side, everybody else on the other.

Amid the clash shoppers are likely to find offbeat discount deals, new shopping hours and a looming lack of popular products ... like T.M.X. Elmo at Toys'R'Us stores.

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The day after Thanksgiving is dubbed "Black Friday" because it's when retailers are said to finally move out of the red, representing losses, and into the black, indicating profits.

It also marks the start of the four-week gift-buying shopping blitz leading up to Christmas.

For retailers, November and December sales are critical because the two months together account for as much as 50 percent of their profits and sales.

Eager to capture early holiday sales momentum, merchants battle each other on Black Friday by offering steep discounts on the season's hottest products in a bid to lure bargain-hungry shoppers and lock in critical holiday dollars.

What's the outlook for this year? Good but not great.

Despite concerns that a cooling housing market has made homeowners feel less wealthy and less inclined to shop, overall retail sales have increased so far this year.

According to some retail analysts, consistent income growth combined with the recent gas price retreat helped to offset the negative housing effect and should continue to be a spending catalyst in the coming weeks. (Full story)

Nevertheless, the National Retail Federation (NRF), the industry's largest trade group, estimates holiday sales will grow 5 percent to $457.4 billion, slower than last year's 6.1 percent increase.

Wal-Mart: All business behind the smiley face

Wal-Mart (Charts), the world largest retailer, unveiled its big holiday deals weeks ahead of Black Friday, slashing prices on popular merchandise such as toys, electronics (including a 42-inch Plasma HDTV for $988) and a variety of home appliances. (Full story).

Wal-Mart then announced a slew of further discounts at midnight on Thanksgiving morning, including an XBOX 360 for $399 and a KitchenAid Classic Stand Mixer for $149.

The retailer appeared to have learned its lesson from two holidays ago when it didn't discount heavily and lost crucial sales to its competitors. Moreover, Wal-Mart is yet to see a solid upswing in sales at its stores this year.

"Wal-Mart never again will replicate what [the company] did two years ago," said Marshal Cohen, chief industry analyst with market research firm NPD Group.

For budget-conscious consumers, the good news is that Wal-Mart has set the stage for a serious holiday price war with discount rivals Target (Charts) and Costco (Charts), value-price department stores like J.C. Penney (Charts), Sears and Kmart and specialty sellers like Best Buy (Charts) and Circuit City (Charts).

"Wal-Mart's certainly taken the lead in the holiday sales race," said Cohen. "By setting the early price cuts, Wal-Mart may have convinced not just low-income shoppers but also mid-income customers who would've gone to these department stores for the doorbuster deals to first consider its deals especially in toys and electronics."

Black Thursday for some merchants?

Spooked by Wal-Mart's aggressive strategy some retailers, including Kmart, Big Lots, BJ's Wholesale Club and CompUSA ,are trying to get a head start by opening their stores on Thanksgiving Day.

Gail Lavielle, spokeswoman for Sears Holding (Charts), parent of Kmart and Sears, said all of Kmart's more than 1,000 U.S. stores will be open from 7:00 a.m. to 9:00 p.m. on Thanksgiving Day. Kmart is giving Thursday shoppers so-called doorbuster deals on board games, cameras, holiday decorations and some Martha Stewart-branded products

Some malls around the country are also gearing up to ignite the shopping frenzy at the stroke of midnight as Thanksgiving becomes Black Friday. (Full story)

Outlet mall developer Tanger Outlet Centers will run its "Moonlight Madness" midnight event at eight of its 35 centers.

Said NPD's Cohen, "I'm no longer calling it Black Friday but 'red-eye Thursday'," adding that the Thursday openings could alter the sales and traffic dynamics on Black Friday and over the weekend.

"We're going from a typical three-day shopping blitz to a four-day period," Cohen said. "This will spread out the crowds so it won't be as chaotic on Saturday and Sunday but it could also take away from the weekend sales momentum for Kmart and BJ's."

Or maybe not. "I think the Thursday openings will give retailers an even bigger Black Friday," said Candace Corlette, retail analyst with WSL Strategic Retail.

The NRF expects about 137 million shoppers will hit stores over the three-day Thanksgiving weekend.

No T.M.X. Elmo at Toys 'R' Us on Black Friday

Shoppers are getting stung as stores already post 'out of stock' signs on some of the hottest holiday items like T.M.X. Elmo, PlayStation 3, Wii and some plasma TVs.(Full Story)

Toys 'R' Us told CNNMoney.com that the retailer will not have T.M.X. Elmo in any of its stores on Black Friday.

(Subsequent to the initial publication of this story, Toys 'R' Us informed CNNMoney.com that the company was notified by its supplier late Wednesday that there "was a high probability" the retailer will have T.M.X. Elmo in its stores over Black Friday and the weekend.)

Even though retailers say they'll restock on these must-have gifts through the season, given that demand for these item is clearly outstripping supply, there's no guarantee that you'll find any of these products in time for Christmas.

Cohen warns that many consumers will be extremely frustrated and may decide to shun some retailers.

"This is a very risky move by Toys 'R' Us especially when the company needs all the sales it can get against Wal-Mart's lower prices on many of the same products," said Corlette

But the 10th-anniversary version of the furry red doll is available on eBay if you don't mind paying double or triple its original price of $39.99.

E-tailers are already projected to have a stellar season this year, but industry watchers expect in-store shortages could also help pump up traffic and sales at many Web sites.

ComScore Networks estimates online retail sales over the Thanksgiving weekend are forecast to reach $1.15 billion, up 24 percent from the same period last year, while total holiday-related buying on the Internet is forecast to jump 24 percent to more than $24 billion.

Special report: Holiday Money 2006

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