Half-pint toy giant pursues small market growth plan - Tons of Toys

Discount Store News, May 9, 1988

Half-Pint Toy Giant Pursues Small Market Growth Plan

WAREHAM, Mass.--Tons of Toys, the 15-store specialty chain based here, announced plans to open three more stores in New England, continuing its strategy to pursue growth in secondary markets where competition is not as intense as in major cities.

Two stores will open this month in Milford and Marlboro, Mass., and its second Cape Cod toy store will debut in June in Falmouth, Mass.

In March, the growing chain opened a unit in Rockland, maine, followed by a Nashua, N.H., store which opened April 16. An unspecified number of store openings are planned for this fall.

Mainly, expansion has been fueled by funds the toy chain obtained when it went public last May. Sales for the most recent eight month period between June, 1987 and Jan. 31, 1988, were $10.4 million.

The toy specialty retailer was founded in 1981 and operates moderate-size toy supermarkets of 12,000 square feet in medium-size markets.

According to president and chairman Bruno Ferretti, a former executive at Avon, Mass.-based Child World, Tons of Toys deliberately avoids major metro markets where large competitors such as Toys "R" Us and Child World are located.

"I realized long ago, during my 30 years in the retail business, that I could not start a chain that would directly compete with the toy giants. I knew that I would have to come up with an alternative strategy," said Ferretti, who in 1969 was one of three managers charged with developing a toy supermarket subsidiary called Spree for Zayre Corp. Ferretti, who earlier served as a toy buyer for 13 years with Lechmere, the Dayton Hudson hard lines chain, acknowledged that the failed Spree experiment taught him a lesson.

"Even though nine stores opened in two years, the project failed because the stores tried to emulate the toy giants too closely and were placed in markets to directly compete with them," he said.

According to Ferretti, Tons of Toy's 12,000-square-foot stores need only produce about $1.4 million in sales per year to be profitable, compared to the $4 million to $6 million annual volume needed to reach break even by the 36,000-square-foot to 42,000-square-foot stores operated by other toy supermarkets.

Tons of Toys' greatest benefit to its customers is the convenience it offers, Ferretti said. In most of these "markets of opportunity," as he calls them, consumers would have to travel anywhere from 20 to 50 miles to get to the next closest toy supermarket. In Rockland, Maine, for example, the closest toy supermarket is 80 miles away from the Tons of Toys store.

Ferretti is less concerned about the discount department stores situated near his stores. In Rockland, both Zayre and Ames are located near his store.

"It is well documented that the mass merchandisers are losing market share," Ferretti said. "The toy retailing business [specialty stores] has dramatically grown to a 40 percent market share of a $13 billion industry."

In merchandise mix, Tons of Toys stays similarly stocked to other toy giants--like a baby Toys "R" Us," said Ferretti. It does not offer baby food, clothing or diapers as do most toy giants. Nor does it carry secondary brands or imported toys.

Its product line stays strictly within the confines of name brand products. Each store averages about 8,000 sku's.