December 21 2007: 4:55 AM EST
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The real savings start AFTER Christmas

Retailers have been slow to lower prices before December 25th, but look for big discounts and gift-card promotions right after.

By Suzanne Kapner, writer

Even popular toys like TMX Tickle Me Ernie and Cookie Monster have been discounted this year.

NEW YORK (Fortune) -- If you thought the discounts were big before Christmas, just wait until Dec. 26th. That's when retailers will really slash prices.

But not all products will be discounted equally. Expect the biggest deals post-Christmas on women's apparel and consumer electronics; toy prices, which were slashed sharply in the last few weeks, have less room to fall, according to Dan de Grandpre, the founder and editor of Dealnews, which tracks holiday discounts.

De Grandpre said he has seen toy prices fall 60 percent in the past three weeks, including discounts on popular toys such as Fisher Price's T.M.X. Tickle Me Ernie and Cookie Monster. One reason for the heavier-than-usual discounting: Until recently, Amazon had a partnership with Toys "R" Us to sell playthings online. That relationship ended in a lawsuit, with a New Jersey Superior Court Judge ruling that Amazon (AMZM) violated an agreement to make Toys "R" Us the exclusive toy retailer on the site. Now on its own, the site has gone on a discounting tear. "Amazon has aggressively cut prices this year, most likely to establish market share," de Grandpre said.

Apparel, particularly women's clothing, is likely to see bigger markdowns after Christmas. Apparel has been one of the weaker categories this holiday season, but many retailers held off on big clothing discounts until recently. "We only started to see 50 percent off sales on apparel in the last week, so apparel prices have further to fall," de Grandpre continued.

Historically, January was a sleepy month for retailers. Following the Christmas rush, most stores used the month to clear excess winter goods and get ready for spring. But with the rise of gift cards, January has becoming increasingly important in calculating overall holiday sales. "January used to be a throwaway month," said Marshal Cohen, a senior analyst with the NPD Group, a market research firm. "Now it's become a very important month."

Gift card sales are expected to total $26.3 billion, up from $24.8 billion last year, according to the National Retail Federation. Because consumers who redeem the cards tend to spend more than the value of the gift, retailers will be pulling out the stops to get shoppers back in stores as soon as possible. (Retailers typically do not count the money on gift cards as revenue until the cards are redeemed.)

"Retailers could encourage consumers to redeem their unused gift cards for this year's gift purchases by offering a dollar amount or percentage off the purchase, free gift wrap or some other bonus," according to a recent holiday shopping survey by Deloitte & Touche. "If retailers are not thinking of specific promotions around gift cards, they should be," said Stacy Janiak, Deloitte's U.S. retail practice leader. "Because more of the holiday wallet is not going to get spent in their stores until after the holidays."

Circuit City (CC, Fortune 500), for instance, is offering shoppers who redeem gift cards by Jan. 13 the chance to enter into a sweepstakes. Prizes include an Olympus camera and the chance to win further gift cards worth up to $500.

Most retailers are secretive about their post-holiday promotions and only reveal them in newspaper circulars on Christmas Day. But some online retailers are getting a jump on post-holiday promotions. De Grandpre said he has noticed a growing number of Internet retailers having post-Christmas sales as early as Dec. 21, the shipping deadline for products guaranteed to arrive by Christmas Day.

So if you don't need to buy that gift (for yourself, perhaps) for a few more days, it might pay to wait.  To top of page

Company Price Change % Change
Advanced Micro Devic... 38.56 0.21 0.55%
General Electric Co 11.52 0.23 2.04%
Bank of America Corp... 32.93 0.23 0.70%
Pfizer Inc 37.28 0.73 2.00%
Cisco Systems Inc 45.09 0.18 0.40%
Data as of Nov 15
Index Last Change % Change
Dow 28,004.89 222.93 0.80%
Nasdaq 8,540.83 61.81 0.73%
S&P 500 3,120.46 23.83 0.77%
Treasuries 1.83 0.02 1.05%
Data as of 8:16pm ET

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