'R' Us
Wal-Mart (and Target's) dominance over the toy industry, as we have shown, has grown over the last few years. Now the last obstacle to that dominance is about to give up. Toys 'R' Us, the toy superstore, has announced that it wants to get rid of its 1,200-store chain. That announcement follows the recent bankruptcies of toy retail specialists KB Toys and FAO Schwartz, and the ongoing sell-off of Disney's chain of Disney Stores.
There's no decline in the $20 billion toy industry. It's just that the concept of a specialized toy store (other than a small boutique) is dead. Wal-Mart and Target can offer lower prices and have first access to the most popular toys. Chains like Toys 'R' Us are stick with a large inventory of slower selling toys while the general retailers are selling hit toys as loss leaders to draw in the crowds.
The company announced that it wants to sell of the toy stores and concentrate on its more profitable baby-product stores, Babies 'R' Us, a 200-store chain. The company just recently closed down its money-losing 146-store Kids 'R' Us chain.
It is generally considered that the toy stores themselves are of little interest to any buyers. However, the real estate, usually prime shopping locations, may be worth billions. That's what is happening to K-Mart, whose properties are being sold off one by one and probably what will happen to Target's newly spun off Mervyn's retail chain. The Kids 'R' Us sale, to Office Depot was solely for real estate as well.
Once again, the difficulty of competing against hard-driving market leaders. As Reuters quoted one investment banker as saying, "So unless you're a mom and pop store selling something really unique or you're Wal-Mart, you're going to die if you're in the middle."
7:06:49 PM 
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