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09/10/2007

Toys ‘R’ Us not playing games with success

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The reinvention of Toys “R” Us’ merchandising strategy has helped the company regain its status as the “world’s leading specialty toy retailer.” Since the company went private in 2005 under the ownership of investment groups Bain Capital, Kohlberg Kravitz Roberts & Co. and Vornado Realty Trust, and brought new leadership on board, most notably in the form of chairman and ceo Gerald Storch and head U.S. merchant Ron Boire, Toys “R” Us has regained its status as the key category player. Underperforming stores have been shut down, over-cluttered aisles have been cleared, exclusive product has been brought in and hot toys are always in stock.

“We have a slogan that we use inside our company—that we are playing to win,” said Gerald Storch, Toys “R” Us’ ceo, in an interview with Retailing Today in February. “I think in the past we got a little too focused on looking over our shoulder at the people coming after us and took our eye off our own game. We are the leading toy company in the world.”

TOYS ‘R’ US INC.Source: Company reportsFor fiscal year ended Feb. 3, 2007
HEADQUARTERSWayne, New Jersey
2006 SALES$13.05 billion
2006 EARNINGS$649 million
STORE COUNT1,515

After years of losing market share to mass-market competitors like Target and Wal-Mart, Toys “R” Us has found a way to capitalize in an area where those competitors could not—by offering a host of exclusive toys during the crucial holiday shopping period and keeping in stock the hottest holiday items, such as the T.M.X. Elmo, the Nintendo Wii and the Kid Tough Digital Camera from Fisher-Price.

“[Exclusives] are a key part of our strategy and a growing part of our strategy,” Storch said. “We are the toy authority. We are the world’s greatest toy store, and those are not just empty words. Our people live and breathe toys and that’s not true of any other company in the world. So we should be able to design and market a significant number of own-label products, and additionally we should be able to work with our vendor partners on designing products which are exclusive products to Toys ‘R’ Us and meaningful and significant to our target audience.”

Toys “R” Us has continued its strategy as the “expert” toy retailer this summer. At the beginning of June, the company released the top 24 toys it considered to be the hottest summer items. On the list are some of Toys “R” Us’ own-name products, items inspired from summer blockbusters such as “Harry Potter,” “Transformers” and “SpiderMan 3,” and a menagerie of updated outdoor games such as Charms and Stickers SkipIt, a Bubble Mower from Fisher-Price and a Sidewalk Paint Sprayer from Crayola.

“This ‘best of summer’ list is our assessment of the season’s standout items that will help parents keep their kids smiling,” said Ron Boire, president of Toys “R” Us, U.S. “From items that transform lawns into backyard wonderlands to great items for rainy day fun, our stores showcase the broadest assortment of summer toys available.”

In addition to stocking both popular and unique toys in stores, Toys “R” Us has also made sure its store environment is a more welcoming place to shop in. Since Storch arrived at the company in early 2006, it has shuttered 85 underperforming units. Toys “R” Us has also spruced up the remaining 586 stores by cleaning up the aisles, shining the floors and generally making each store a more pleasant place to buy toys.

“Clearly, the stores are where the customer meets the brand,” Storch said. “And so it’s very important that our store experience be far better than it had been in the past, and we moved [in 2006] to do those things which we could do most readily, such as clean the floors more frequently and [remove] some of the clutter from the stores, where in the past there were just too many items in the aisles. We’ve made quite a bit of progress on that front.”

Employing associates that really know the toy business is the final prong in Toys “R”Us’ merchandising strategy to continue being the leading specialty toy retailer.

“We’ve worked hard to teach our team to be very customer-facing,” Storch said. “So when you walk in the store, there’s a vastly higher likelihood that someone will approach you than there was in the past, and a much higher likelihood that they will ask you what they can help you find today, which is what the [toy] authority does. We are the authority in our category, so we need to provide that level of service to our customers.”

As Toys “R” Us moves forward, the company seems poised to continue executing its “expert” merchandising strategy and focus on the future rather than its past.

“We are the world’s greatest toy company, and it’s a core part of our strategy that we continue to be,” Storch said. “It’s long past due for everyone on the outside to stop focusing on discussions that were had [in the past] and start focusing on the future of this company. This is a growth business and we are doing quite well.