Toys “R” Us Raises Interest in Christmas Club
Toys "R" Us is banking on its new promotional program to prop up
the chain’s sales during the Christmas holiday season. The retailer’s Christmas
Savers Club will allow consumers to put away money in an account for
the holidays, al a the old bank Christmas clubs, and will add a perk —
three percent interest on the dollars in the account. When the holidays arrive
and it’s time to cash the account in, consumer can put the dollars to work
buying products in Toys "R" Us or Babies "R" Us stores
or on the company’s website.
The maximum amount consumers can earn is $75 based
on $2500 in the account. Members of the Christmas Savers Club can begin withdrawing
funds on October 31.
"We’re a relatively old brand, and we’ve started to use components of
nostalgia within our brand, so we’ve looked at things that people used to do.
Christmas savers’ clubs were one of those things that people used a lot, especially
in times when budgets were tight," said Greg Ahearn, senior vice president
for marketing and e-commerce for Toys "R" Us, to The Record (Hackensack,
NJ).
"Parents and gift-givers can better plan their holiday spending well
in advance of the season, while we provide them with a convenient, effortless
way to budget," said Mr. Ahearn, in a press release.
"Saving early for the gifts they will likely buy is smart — plus, the
added bonus they receive can cover the cost of additional presents," he
added.
Industry watchers have reacted positively to the program.
"It’s better than a bank account," Sean
McGowan, a toy industry analyst at Needham, told the New York Daily News.
"This is money that people can feel secure that they know that no matter
what happens they’re going to be able to create the Christmas for their kids
that they want to," Chris Byrne, toy consultant and toy trends researcher,
told The Record. "That’s one of the things driving layaway and
all this."
[Editor’s
note: Toys "R" Us also offers a layaway program.)
Discussion Questions:
What do you think of the Toys "R" Us Christmas
Savers Club? Will we see other retailers, or perhaps even debit/credit card
companies, try something similar?
- Toys "R" Us Introduces Its Christmas Savers Club, Presenting Smart
Shoppers with a Rewarding Way to Save for the Holidays – Toys "R" Us - Toys
‘R’ Us to unveil Christmas Savers Club that allows customers to earn 3% interest
– New York Daily News - Toys "R" Us
launches Christmas Club savings program – The Record - Christmas
Savers Club – Toys "R" Us
The Club is a great idea, provided that consumers have the extra money to put away for holiday presents. At 3%, TRU is offering an interest rate that is significantly higher than most banks. If they also value price their merchandise this holiday season, TRU could have a winning promotion, leading to higher sales.
A good idea on the surface, but I think it’s a little risky. In the competitive landscape of toys where Walmart is a big player, and the Christmas toy price wars are infamous, as a parent I would be reluctant to put my money where it might not go as far.
Another concern is that the interest rate is better than most banks and I’m sure TRU will be trying to be price competitive; what will happen to their margins? I give them kudos for trying to shore up sales for the coming Christmas season especially in light of the uneven and anemic recovery, but I hope they have something else in their bag of tricks to entice shoppers to choose them for their toy purchases.
This is certainly an innovative idea and may well be a good idea, although I don’t know what the impact will be on margins. There’s nothing wrong with recycling an old type of promotion with a new twist. My initial reaction was that Christmas Savers Clubs were completely pass, but on reflection, the timing couldn’t be better.
We currently live in an economy in which 28% of shoppers, according to one survey, are experiencing difficulty in purchasing necessary groceries, so any program that helps consumers save for Christmas and get 3% interest (better than the banks!) for doing so should be appealing. It will keep shoppers in play during the all-important Christmas selling season. It will likely strongly benefit Toys “R” Us sales during the fourth quarter. The “X” factors are the impact on margins and the question if consumers will have the willpower to put money away during the course of the next six months.
This is one to watch.
I don’t like it. TRU’s problem isn’t that people can use extra cash at Christmas, it’s that other players are capturing those dollars through speed to market, more exciting advertising, etc.
I’m sure this will be a great program for all current TRU shoppers but I’d be concerned it might erode margin faster than it will build sales.
It’s a great plan that promises to make toy buying seem downright righteous. Listening to Karen Dodge, TRU’s SVP and chief merchandising officer, speak during the keynote panel at last week’s Licensing International Expo, this would also seem to support TRU’s implied intention to drive higher ticket purchases. When the panel conversation turned to the quest for value, Ms. Dodge was quick to point out that value doesn’t necessarily mean “a $10.00 toy;” a $100 item can also be perceived as a value…especially when the money’s already in the “bank”!
With a lay-away program you have to decide what to purchase early and then you pay for it over time. With this program you set aside money and then can decide on products later. This is an interesting alternative to a lay-away program. Adding interest is a good incentive.
I think it’s creative and sounds like it has potential. They’re right to think that it’s going to take efforts like this (and many others) just to compete with Walmart during Holiday and otherwise.
The bigger issue for TRU is brand. Walmart has always been about price and now selection–and they have top of mind in the market place. They own that space. Clever discounts and promotional programs will chip away at the larger element of customer perception, but it’s going to take time, maybe a lot of time. Hang in there with that creativity, TRU.
It is a nice idea, but no game changer. Consumers have paid down their debts for 24 straight months. That is an incredible string which emphasizes where extra money is going. I am not sure that those who could benefit from the Club would choose to earn 3% rather than pay down at the interest rate of 18% and more.
Will others try it? Perhaps, but similar ideas have come and gone many times in the past. Let’s give this a big “ho-hum” and watch TRU lose sales to the internet.
Do consumers have the disposable income to be able to do this? I would also compare to the relaunch of the various layaway programs. I think in this day and age, people would prefer to layaway for a specific item or keep their cash. All loyalty programs are trying to create ways to cut costs and give more short term/temporal price discounts.
Last year a number of discount and dollar store retailers made a wide range of toys available for $5-10. A Christmas Club may be good for consumers already planning to make big-ticket purchases (such as bikes), but with toys becoming a widely available and cheap commodity it may have less appeal than Toys “R” Us expects.
My gosh! Talk about “Back to the Future.” Christmas Clubs!
All I can envision is the nightmare in the stores trying to make this work…it’s surprising any POS systems still have layaway. Now we’re going to add some kind of Christmas card process? Ayiyiy.
I like the idea. I recall that as a youngster, my father would give me money and the Christmas Club books to take to the bank to get them stamped (I think). I had no idea what I was doing other than completing an errand. I also knew he only did this at certain times of the year.
TRU is insuring some early sales predictability for the Holiday Season by having this money in escrow in advance. At 3% interest it affords the customer a savings on their purchase. The customer now has to decide how much they will be spending at TRU because this is not going to do them any good anywhere but TRU. It is simply budgeting early for known expenditures later.
It is worth a try and if successful, others will follow. This is a no-lose situation for TRU.
Coming out of the recession, one of the big questions concerning consumer behavior was whether or not their new fancy for frugality would hold.
Bank of America and others in the financial services sector have taken steps to launch products that are easy to understand and encourage/reward good financial habits. Toys has launched a program in this category and I think it is wholly appropriate for their audience and will be effective to secure sales come holiday time.
By having a savings account established, the purchase decision will be heavily influenced towards Toys and should result in incremental sales that might otherwise go to competitors. Those sales should offset the 3% give-away and create positive ROI for this promotion.
I like it for a few reasons. By using the Christmas Club, TRU is able to capture the customer regardless of what product is hot or pricing pressure. If anything, it also creates some great press and differentiates in the market.
I don’t see it as a huge percentage of their business but I don’t think it has to be, to be successful.
I like the idea but would prefer to see them clean up more of their existing stores, improve customer service, and get more connected to the local community. They still seem very “corporate” and disconnected from some of the markets they serve.