Chains' toy strategies mix basics with high-tech

Drug Store News, Feb 19, 1990 by Christine Bizzarro

Chains' toy strategies mix basics with high-tech

Drug chains are using diverse strategies to compete with discounters for toy business. Some are sticking to the toys they know best--such basics as puzzles and board games, plush and action figures--while others are starting to invest in high-tech electronic merchandise, extending their range of price points.

This could help set the stage for Christmas 1990, which Jodi Levin, Toy Manufacturers Association spokesperson, said "will be a mixture of high-tech, which has proved that it can deliver quality and play value at a reasonable price, and basic. No matter how many high-tech products are introduced, children will still want to play with dolls, toy trucks and cars," she said.

That's good news for retailers who are investing in high-tech, while building on their basic assortment.

Lon Resnick, toy buyer at Affiliated/Associated, predicts another basic toy year for the chain drug industry. "Board games, Barbie dolls and accessories, and preschool toys will be the bulk of toy sales at drug chains," he said. The licensed Teenage Mutant Ninja Turtles products continue to be the hottest toys for boys, he added.

Resnick said that although electronics like Nintendo will still be hot in Christmas 1990, this category pulls away from the normal toy business in drug stores. However, some chains have decided to invest in Nintendo control decks and cartridges to build sales.

Marty Millman, senior buyer at nine-store Austin Drugs in New York, started selling Nintendo two years ago. "This past Christmas, we had more success with the control decks than we did with the cartridges, because only a few select cartridges [Teenage Mutant Ninja Turtles] were popular, and we ran out of them," he said.

Austin does well with Nintendo

Austin, located in affluent Long Island neighborhoods, has had continuing strong sales with Nintendo. Millman said he can also sell TV-advertised toys ticketed as high as $49.99. The chain devotes 40 feet to its everyday toy set, with an additional eight to 16 feet during promotion.

This past Christmas, Millman said Little Tykes preschool items and all the Batman-type vehicles were high-ticketed items that sold well.

A border drug chain serving both the United States and Canadian markets made the decision to sell the Nintendo control deck this Christmas, and with a $100 ticket, "the item was a blowout," the buyer said. The chain dabbled in high-tech toys last March when it started selling the cartridges.

This buyer said Canadian stores sold the Nintendo system last Christmas for $200, and the game cartridges for approximately $25 more than they sell for in the U.S. Canadian shoppers knew they could save a substantial amount buying Nintendo at this drug chain, which is exactly what they did.

"We virtually have no competition from discount stores in our market, so we devote an average of 64 feet to toys in our stores," the buyer said. While pegged toys $5 and under are the best turners here, she agreed with Levin at the Toy Manufacturers Association that the future of toys lies in a mix of high-tech and basics. This chain carries a wide assortment of plush toys, puzzles and board games. And, the chain recently added a few more items to its arts and crafts mix, as the buyer is noticing more of an interest in indoor hobbies.

Rick Burns, buyer at Snyder Drugs in Minnetonka, Minn., said he tried to buy into the Nintendo craze two years ago, but at that time the company didn't want to take on any new customers. And, now he's glad he didn't.

"It's a big investment, with virtually no gross margin," Burns said. And, nearby Target discount stores do a good job of selling Nintendo, he added.

Instead, Burns said he tries to stay under the $25 ticket with toys in Snyder's average 40-foot toy department. Although Burns said sales have been flat for the past three years at the chain, he's trying to enhance growth by promoting toy themes in conjunction with the Christmas selling season.

"Last Christmas we did a Sesame Street theme, and advertised 10 to 12 items in our circulars, and displayed them for three to four weeks in a full endcap in the stores," Burns said. He's had similar success with Disney toys, which he advertised and promoted on endcaps when Mickey Mouse celebrated his 60th birthday.

"I suspect that since Bugs Bunny turns 50 years old this year, we'll see a lot of licensed products that we can build a theme around," he said.

Burns said Teenage Mutant Ninja Turtles has been the hottest licensed toy to come around in the past few years, and the products sell well all year long, not just during Christmas. The toys, out on the market for only a few years, even surpassed the current Batman craze at Snyder's, he said.

A buyer from a Midwestern-based chain agreed that the Teenage Mutants were the best sellers this past Christmas. "We sell the action figures for less than $5," the buyer said, and the stores got some free publicity from local radio stations about the toys.

"One of the local radio stations here has a service during Christmas, in which the DJs help their listeners locate stores selling hard-to-find toys. When people called up looking for Teenage Mutant Ninja Turtle items, and complaining that Target ran out of them, the radio station told the listeners to come to us," he said.