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Toys R Us to Team With McDonald's in Japan

September 27, 1989|NANCY YOSHIHARA | Times Staff Writer

Toys R Us Inc., the world's largest toy seller, said Tuesday that it will take its low-price, high-volume specialty merchandising to Japan with the help of Ronald McDonald.

The Paramus, N.J., toy retailer plans to open four to six stores in Japan in 1991 and eventually as many as 100 under an agreement with McDonald's Co. (Japan) Ltd. Under terms of the joint venture, McDonald's may open fast-food outlets at the store sites.

The two are likely to shake up the fragmented retail toy market in Japan. Toys R Us will export its huge 46,000-square-foot store format, which depends on direct shipments from manufacturers for cost savings.

That is likely to test the tolerance of Japan's layered distribution system and the might of the small Japanese retailers whose legal rights to block large, new stores have been modified recently.

McDonald's Japan, headed by the well-known entrepreneur Den Fujita, should help expedite Toys R Us' entry into Japan through site location, real estate and understanding of the Japanese consumer. His firm, which has a 20% interest in the joint venture versus an 80% share owned by Toys R Us, sells $1.2 billion in hamburgers in Japan though 675 outlets. McDonald's Japan is equally owned by Fujita & Co. of Japan and McDonald's Corp. of Oak Brook, Ill.

"What we really have is a situation, given the unique cultural and real estate challenges in Japan, where we thought we should get a joint venture partner. We spent two years exploring the market and came up with Den Fujita," Robert C. Nakasone, vice chairman of Toys R Us and president of its worldwide toy stores, said in a telephone interview from New York.

"Now we feel we have the premier entrepreneur and businessman in Japan who will be our partner," Nakasone added. "His record speaks for itself with what he has done with McDonald's. With his real estate development knowledge and understanding of demographics, he will be helpful in developing an A-plus store network strategy for us."

Nakasone, a Southern California native, said the firm has done some initial work on locations, but he wouldn't disclose the sites.

One industry report has estimated the Japanese retail toy market at $3.2 billion in 1987. Hirokazu Ishii, an analyst at the Nomura Research Institute in New York, said that until recently there were no toy specialty chains in Japan. Toys were largely sold through department or mass-merchandise stores or mom-and-pop outlets. He said Chiyoda, a discount shoe chain operator, recently launched some toy stores.

"The potential is very huge," said Ishii, who follows both Toys R Us and McDonald's. However, he said, the dai teno rule, or big store regulation rule, may be an obstacle.

The rule requires retailers planning stores larger than 6,000 square feet to get the approval of small retailers in the area. Ishii says the rule has delayed store start-ups up to 10 years.

Nakasone sees no problem. "Our understanding is that it (the rule) has been liberalized in the past year with the backing of MITI (Ministry of International Trade and Industry).

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