Nonfoods Talk: No Joys in Toys

Keep an eye on what officials at Toys“R”Us are trying to do in terms of righting their ship. The beleaguered company announced in late August that even as sales declined, its profit picture improved a little bit. While the growth in earnings was not much to write home about—just a $3 million increase on sales of about $2.3 billion—many industry observers say that it may show that the giant toy retailer has finally figured out a way to make money from a category many think is all but dead.

Dead you say? Yes, the toy category, once the staple of just about every mass merchandiser—and even some supermarkets—is on death’s door. Just look at the things your kids do these days and you will quickly realize that playing with toys, after about the age of five, is not one of them, if you exclude the booming video gaming industry.

Toys”R”Us was the primary benefactor of the toy boom in the 1980s, and over the last decade or so, a big loser in the slowdown in traditional toy sales. Unlike some other retail formats, it is pretty hard to re-invent the wheel when you are known as the nation’s toy store. 

The company did not help itself either. Its decision to separate the Babies”R”Us brand into a separate retail division—with its own stores—cost the toy store a large amount of foot-traffic from moms needing to purchase everything from diapers to formula and food. Suddenly these moms were no longer going to Toys”R”Us for their baby needs, often with an older sibling of the baby along for the ride, who wanted something out of the trip. That hurt. 

So Toys”R”Us has been trying to reinvent itself for nearly 20 years. Now, the private equity groups that have owned the chain for about a decade are trying to say that all is good since profits are growing, even if sales are not. Important note to Wall Street experts, especially private equity groups that probably should not have gotten involved in this business in the first place: No one has ever returned to prosperity by just saving money. 

Advocates for Toys”R”Us can say all they want about how this chain has turned the corner. I am not sure that is going to happen until they get a total grip on what has happened with the toy industry and start to downsize the size of their stores, cut inventory and focus on what remains of the once-golden toy business. 

Sometimes the toy business is not much fun at all.

What is the hottest, yet most confusing category in the beauty care area? The answer is the rapidly evolving hair care market. 

The hair care business was once as staid as any in the HBC section. Now suppliers are quickly churning out new items and more expensive line extensions in this category, sensing the opportunity to capture more consumer dollars from shoppers who are eager for unique items and who are willing to spend more on products that they perceive have added benefits. 

The strategy is working well, and will continue as long as retailers devote the space and commitment to the category, while taking appropriate measures that ensure consumers are aware that their store has a large sampling of products. The big question, of course, will be whether retailers want to devote the real estate to this suddenly hot segment.