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Nathan Pang, 3, test drives a bicycle around the Toys R Us store on Los Feliz Blvd. in Los Angeles, California, Tuesday, October 23, 2012.

Rick Loomis, Mct

Holiday wars: Traditional stores vs. online

  • Article by: SHAN LI
  • Los Angeles Times
  • November 4, 2012 - 9:38 PM

The battle is on between bricks-and-mortar retailers and their increasingly potent Internet adversaries.

Frustrated by once-loyal customers who have been wooed away by online merchants, retailers are gearing up with new weapons to stop the flow of shoppers from stores to computers and smartphones.

With the holiday season approaching, some chains are vowing to match prices with their biggest online rivals. Others are offering free layaway and expanding their assortment of unique products or adding Wi-Fi and other digital upgrades inside stores to entice tech-savvy shoppers. There's even increasing talk about same-day deliveries.

In California, traditional retailers are happily anticipating picking up more shoppers after online retailers started collecting sales taxes in September, losing a crucial advantage when consumers comparison-shop. Virginia, New Jersey and several other states will begin collecting sales tax in the next few years.

"We think we have a huge advantage over Internet-only companies," Toys 'R' Us Inc. CEO Jerry Storch said in an interview. "Every possible way the customer wants to use the Internet -- or their neighborhood store -- to interact with Toys 'R' Us is available. The customer can choose how to do business with us."

Online merchants say they are ready to fight. Nearly a quarter of shoppers say they'll go online to do most of their holiday shopping this year, according to a survey from consulting firm Deloitte, and 75 percent said they expect to buy at least one item online. But Web retailers said they sense the competition with traditional retailers and are busy as well, kicking off their holiday ads before Halloween and expanding free shipping and other promotions.

Amazon.com, the nation's largest online retailer and responsible for about half of all Internet retail purchases in California, has geared up.

"Every year we want to offer great deals," spokeswoman Pia Arthur said. "We will have fun types of things going on."

It's always a high-stakes competition for the retail dollar, and experts say this year it's more intense than ever. And no wonder: Merchants rake in an estimated 25 to 40 percent of their annual sales in the last two months of the year. Shoppers this year will spend $586 billion during the holidays, according to the National Retail Federation.

"If the stores don't do more, they are going to become antiquated," said Marshal Cohen, chief industry analyst at NPD Group. "But that is why they are doing so many things right now to test what works, and to tell shoppers that they are in the game."

Traditional retailers will have to work hard to win back customers such as Paul Johnson, once a regular at malls but who now buys "almost everything" online.

"It's such a hassle running around to stores trying to find anything you want," said Johnson, a 30-year-old fashion model from Los Angeles who prowls the Internet for items on his wish list -- including kitchen supplies, DVDs and cotton T-shirts.

Best Buy Co. Inc. and Target Corp. are taking aim at Web merchants with online price matching, partly to grab customers who have used their stores as showrooms -- to check out items before they get a better price on the Internet.

"We are taking on showrooming," said Amy von Walter, a spokeswoman at Best Buy, which has granted salesclerks the ability to match online prices for appliances and hardware including tablet computers and cameras during the holiday season. "It's really about empowering employees to be able to match the price when it makes sense and make the sale."

Target vows to match prices with Amazon and the websites of Wal-Mart Stores Inc., Best Buy and Toys 'R' Us. "It's instant gratification for guests," said Dustin Hamilton, Los Angeles district manager for Target. "Instead of waiting one day or four or five days for something to come in the mail, you get it right away for the same price."

The discounter also has added free Wi-Fi to its stores and placed QR barcodes -- which can be scanned by smartphones to bring up product information -- on ads so shoppers can buy the items directly from their phones.

Toys 'R' Us has extended free layaway until Dec. 16 and rolled out a reservation service so parents can nab popular playthings early and avoid frantic last-minute searching.

"You can go order online and pick it up immediately at your neighborhood store," said Storch, the CEO. "You don't have to wait around home for FedEx to arrive or come home to the little sticky note on the door."

The chain also is pushing the idea that shoppers can browse an expanded lineup of items found nowhere else, including a $150 kid-oriented tablet computer called Tabeo.

Wal-Mart, which already allows shoppers to buy items online and pay for them in cash in stores, is extending layaway and has slashed the price for opening a layaway account. The world's biggest retailer is also testing same-day delivery on certain gift items in three cities and expanding the experiment to San Francisco and San Jose early next month.

The goal is to entice customers with tools that enable them "to shop when and where and how they want," said Ravi Jariwala, a company spokesman.

"Our vision is to win at e-commerce," Jariwala said. "We can do that by connecting the website with stores, and that gives us a unique advantage."

Meanwhile, online heavyweights are beefing up for the holidays as well.

Amazon, which this month opened its first California fulfillment center in San Bernardino, is typically tight-lipped about holiday plans. Last year the retailer raised a ruckus by offering a 5 percent discount for smartphone users if they checked the prices of goods on their price-comparison app in a physical store but ended up buying it on Amazon.

EBay, the online auction and retail site, is dabbling in same-day delivery in San Francisco for shoppers who buy using its eBay Now app. Valets will hand-deliver diapers, shoes or even toilet paper to a place of the customer's choosing in as little as an hour.

Analysts say despite all the hoopla, temporary holiday promotions may not help traditional retailers in the long run.

"The current strategy these guys have of matching prices is not a sustainable long-term strategy," said Sucharita Mulpuru, an e-commerce analyst at Forrester Research. "They have to come up with a compelling store experience and figure out what kind of new services or products will make a store compelling. Because Amazon is really hurting physical retailers."

At least this holiday season, they can count on business from Jessica Barreno, a college freshman in Claremont. Although she shops quite a bit online, Barreno said marathon sessions at the mall with her mom have been an annual Christmas tradition.

© 2014 Star Tribune