KB teams with Safeway Impulse and frequency at heart of nation wide program - Brief Article

DSN Retailing Today, Nov 19, 2001 by Molly Prior

PITTSFIELD, MASS. - Milk, eggs, Cheerios and Sugar Plum Princess Barbie does not read like a typical grocery list, but then again the success of K*B Toys' seasonal toy displays in more than 1,000 Safeway grocery stores this holiday hinges on impulse, rather than planned purchases.

The mall-based toy retailer has built its $1.8 billion business on creating enticing merchandising in a finite space. K*B Toys now can offer this small-box expertise to Safeway, said K*B Toys ceo Michael Glazer.

"Safeway's got foot traffic and legs in the fourth quarter, but it's not focused on toys," said Anton Rabie, president of Spin Master Toys, a Toronto-based manufacturer credited with reviving the Shrinky Dinks maker. "K*B Toys can take what it's good at and offer it to Safeway with the promise of nailing foot traffic and nailing volume."

While K*B Toys would not release details of this new partnership, Glazer did say the chain essentially acts as a supplier to the grocery store. And just as Toys "R" Us does through its online alliance with Amazon, K*B brings Safeway its merchandising expertise, vendor partnerships and understanding of the toy industry.

For both companies, the promotional in-and-out strategy offers a growth opportunity and a much needed fourth quarter sales boost. During an October conference call, Safeway president and ceo Steve Burd told industry analysts it would inject non-traditional SKUs into the mix to drive revenue. "You will see items in our stores in the fourth quarter that we've never sold before," said Burd.

K*B Toys, having reached near-max mall growth with more than 1,000 permanent storefronts, 120 seasonal "express" stores and 29 test boutiques within select Sears stores, sees the grocery channel as a viable growth opportunity.

K*B has been working to understand the supermarket business through its seasonal presence in Price Chopper stores the last couple of years. This year, K*B Toys has extended this program from approximately 25 Price Copper stores to the majority of the chain.

K*B began shipping toys to Safeway stores across the country in mid-October. It has edited the selection to about 125 SKUs with an average price point of $10. Glazer said K*B also provides Safeway a planogram of what the display ought to look like, and includes hot-selling items, such as Monsters, Inc., Power Rangers action sets and several of K*B Toys' private-label items, such as the Interactive U.S. Presidents learning aid. To further encourage the impulse buy, one of Safeway's nameplates Vons, located in Carlsbad, Calif., slashed the prices on several toys, such as Poo-Chi the robotic dog, from $17.99 to $9.99 when purchased with a Vons club card.

The display, averaging 200 sq. ft., is located in most Safeway stores immediately to the right upon entering and will remain there until Dec. 31. "Every bit of space is so valuable to [supermarkets], so the key is being able to maximize turns and profitability," said Glazer.

While Glazer wouldn't talk about initial results, president and ceo of MGA Entertainment Isaac Larian said the program is beating both retailers' expectations. "I hear it's doing fantastic," he said. Larian gave kudos to Glazer's management team--executive vp and gmm Sal Vasta and senior vp of merchandising Tom Alfonsi--for thinking outside the box.

Larian and Rabie agree now that K*B Toys is a privately-held company, management is more focused on profitability and getting creative about growth. "The three have a share in the company, so they now have a drive to do a lot of things that benefit profitability," said Larian. Former parent company Big Lots, then Consolidated Stores, completed the divestiture of the toy division last December.

Glazer, who remains on Big Lots' board, admitted being a privately-held company has been helpful when making real estate decisions. Over the past year, K*B has expanded into the department store through Sears, onto the small screen in a new deal with QVC and, most recently, the supermarket.

Competitor Toys "R" Us has also set up shop in the supermarket format in a limited test with Giant Food, a U.S. subsidiary of Dutch-based Ahold. Since September, Toys "R" Us has quietly unveiled a branded "store" in four Virginia stores.

Toys "R" Us and K*B Toys are hoping to benefit from built-in grocery stores' traffic. Glazer said consumers frequent supermarkets more than once a week, and malls just over two times a month. To compete with the likes of Wal-Mart and the growing number of retailers offering one-stop shopping, the specialty toy retailers have shifted their strategies to be where their customers want to shop.

"What we are seeing now is a consolidation of effort on the part of the consumer," said toy expert Ronnie Goldfinger. He added consumers' collective call for convenience has spawned the growth of the hypermarket business, a model Meijer has had great success with.

As for K*B Toys' seasonal program with Safeway, the response of those in the industry has been positive. Neil Stern of McMillan/Doolittle said grocery shoppers should respond well to the impulse and seasonal nature of K*B's offering. This will likely tow in children during shopping trips with their parents; the low-price points may make for good "bribe toys." If the displays offer the right toys at the right price, K*B's strength, Safeway is going to sell a lot of toys, added Stern. "I think it's going to work," said Rabie. "I'd be surprised if it didn't."