Back in the center of the toy universe - Toys "R" Us: taking the family of brands to new heights

DSN Retailing Today, Oct, 2003 by Doug Desjardins

Toys "R" Us has come a long way since Charles Lazarus opened his first Children's Bargain Town store in 1948. In the 55 years that have passed since the chain was born in Washington, D.C., Toys "R" Us has become a global giant with 1,614 stores worldwide in 30 different countries.

Some of the most significant developments in the chain's evolution occurred in the 1980s and 1990s, when it added the Kids "R" Us and Babies "R" Us divisions and began expanding into new markets overseas. But the chain has undergone its most sweeping period of change in the past five years, both in the look of its stores and in the way the company operates.

"I think our resources now see us as a powerful global company," said Toys "R" Us Chairman and ceo John Eyler. "Increasingly, our merchants are working together as teams with specific areas of expertise, advising all of the divisions and harnessing all the power of our divisions."

For starters, the company's management team has been revamped since Eyler took the helm in 2000, with several Toys "R" Us veterans like Richard Markee changing roles.

"If you take a look at Babies, Kids, Toys, Dot.com and International, none of the operating heads of those businesses has been in their role more than 18 months," said Elliott Wahle, U.S. president of Babies "R" Us and Kids "R" Us. "So I think we all bring a very fresh look to it and a non-parochial view to making the portfolio better."

The new approach has integrated the company's main divisions--taking them out of their "silos"--in several different ways. Earlier this year, the company moved to a new corporate headquarters in Wayne, N.J., that now houses all the Toys "R" Us brands under one roof.

And it has blended its three key divisions together in a new concept called Geoffrey Stores. The company began testing the new smaller box store in four markets last year that mixed merchandise from Toys "R" Us, Babies "R" Us and Kids "R" Us along with interactive elements such as parties and photos. Last month, it expanded that test by opening 17 new Geoffrey's Toys "R" Us stores in four new markets with a larger rollout in the works for 2004.

But the biggest change has come in the company's core U.S. toy stores. In three short years, Toys "R" Us overhauled its 681 stores in the United States, giving them a new look and a new attitude.

Toys "R" Us began the process of reinventing itself in the late 1990s. At the time, the chain had hit a low point with its stores aging badly and its customer service sliding. "In the back half of the 1990s, we lost market share seven years in a row, and we disappointed a lot of customers because our stores did fall into disrepair," said Eyler.

Facing increasing competition from Wal-Mart and other toy specialists, Eyler "went back to the drawing board in 2000," as he puts it, and committed the chain to its most comprehensive overhaul in history. In early 2000, the company launched a three-year remodel plan it dubbed "Mission Possible" that changed the look and layout of stores and added key departments like Imaginarium and R Zone.

And the remodel went beyond upgrading the physical look of its stores. "It was also about building a stronger organization that was capable of merchandising, developing interesting and exclusive product and being in stock," said Eyler. "We replaced over half of the field organization, including the head of the field organization, to make sure we were getting the right people to manage the stores who could bring a customer service environment to life."

Toys "R" Us finished Mission Possible in October of 2002 and continues to fine-tune the format. Even though sales at Toys "R" Us stores fell 1% during the 2002 holiday season and are down slightly this year, customers are giving the stores a ringing endorsement. Toys "R" Us president of U.S. Stores Richard Markee noted that customer ratings have improved consistently the past 18 months.

"[Customers] can find merchandise in stock, they think the stores are better organized and nearer and our associates are more engaging," said Markee.

The experience with Toys "R" Us has reverberated throughout the chain. This year, Toys "R" Us is already starting to remodel stores to its 183-store Babies "R" Us chain even though they're less than a decade old.

"The division is only seven years old, but we're remodeling 25 Babies stores this year because we have to keep them clean, fresh, well-lit and up-to-date," said Eyler. "That's part of the bond we have with the morns of America wlTo shop there."

Toys "R" Us will likely take the same approach to its 559 international stores. Those stores are generating a steady profit with $160 million in operating earnings in 2002. "The reason our international business has been growing and improving in profitability is that they are a much younger portfolio of stores and they've never gotten to the point of disrepair," said Eyler.

And its 20-year-old Kids "R" Us division is also being overhauled. Many of its 146 stores are being remodeled to a more contemporary look called R Gen, and the chain is also creating combo stores with Toys "R" Us and Kids "R" Us.