The Battle for Christmas has Begun

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Back in August, I talked about some of the toy companies that could be hot this year and suggested LeapFrog Enterprises (NYSE: LF) as my "if you can only choose one" pick for investors. Turns out that my reasoning behind that pick was pretty solid—LeapFrog's "LeapPad 2 Explorer" tablet made it on Time to Play Magazine's "Most Wanted List," and was also featured in the toy guide "The Toy Insider." Priced at just under $100, the tablet for preschoolers and children will very likely be a major hit this Christmas, just as its predecessor was last year.

Other entries on the "Most Wanted List" include offerings from both of the other companies I mentioned as investment options, Mattel (NASDAQ: MAT) and Hasbro (NASDAQ: HAS). Both are hoping for a stronger Christmas season than they had last year, and with expansions in product lines such as "My Little Pony" and Mattel's Fisher-Price offerings, as well as the return of the Furby, there's a good chance that they'll pull it off. LeapFrog, Mattel, and Hasbro are all trading significantly higher than they were a year ago and will likely do quite well this Christmas, provided that there are no major problems with their product launches.

There's a bigger battle brewing this Christmas, though: the battle of the toy sellers. There are multiple combatants in this ages-old contest to "win" Christmas, and two of the biggest physical retailers are Wal-Mart Stores (NYSE: WMT) and Toys "R" Us. These two were major competitors in the toy market last year, but this year it seems that the conflict between them will be even more intense.

One of the key factors in last year's Christmas battle was the return of layaways at Wal-Mart. With a $15 deposit, consumers could once again reserve toys, electronics and select other products to make payments on over time. As long as all those payments were made on time, that $15 was later refunded in the form of a gift card. Toys "R" Us had trouble competing against Wal-Mart's greater market share and accessibility, as well as Wal-Mart's notorious Black Friday sales.

This year, things have gotten even more aggressive—Wal-Mart brought layaway back a month early and dropped the deposit amount to $5, while Toys "R" Us has waived deposit fees through Oct. 31 and eliminated minimum purchase amounts. Though Wal-Mart will likely come out on top in sheer sales, this change to layaway will likely draw in more early shoppers to Toys "R" Us than it would have gotten otherwise.

Layaway is one way that brick-and-mortar retail outlets are managing to set themselves apart from online retailers in recent years; as far as I know, Sears's (NASDAQ: SHLD) and Kmart stores are some of the only retailers to offer online layaway (and even that is limited to only certain items.) Of course, they are also some of the only retailers who didn't do away with layaway or make it a seasonal option when cost-cutting measures saw a number of companies trying to shy away from layaway sales. A number of online retailers offer preorders, and in some cases you don't have to pay for them until the items ship, but that's a bit different than an actual layaway program.

With the battle for Christmas getting off to such an early start this year, who do you think will come out on top? Will layaway make as big of a difference this year as it did last year, or do you think that the sales boom that Wal-Mart received from bringing back layaway was fueled by the novelty of being able to use the service again? Do you think the toys that are anticipated to be hot this Christmas will actually sell the way industry insiders project? I've always found it interesting to see what becomes a top-seller and what falls by the wayside, and would like to get your opinions on the subject—so give me your thoughts in the comments section below!

Croaxleigh has no positions in the stocks mentioned above. The Motley Fool owns shares of Hasbro and Mattel. Motley Fool newsletter services recommend Hasbro, LeapFrog Enterprises, and Mattel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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