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Analysts R Taking to Geoffrey

Many see promise in Toys R Us stores that feature a talking giraffe and activities for kids.

June 30, 2004|From Reuters

Toys R Us Inc., the No. 2 toy seller, is hoping the novel "retailtainment" approach of its Geoffrey stores will accomplish what years of price-cutting and promotions have failed to do: get shoppers in the door all year long.

Instead of just nabbing the odd shopper for a birthday visit or during the holiday season, the Geoffrey stores aim to draw families all year with a combination of shopping and fun that includes extras like arts and crafts, haircuts, a photo studio, trading-card leagues, party rooms and story hours.

"The industry buzz is pretty encouraging," said Sean McGowan, analyst at Harris Nesbitt Gerard. "It makes a lot of sense. Strategically, this company needs compelling reasons for consumers to go to that store instead of somewhere else. On paper, at least, it seems like a great idea."

The Fond du Lac, Wis., store, which opened two years ago, has a wide-open floor plan -- strikingly different from the typical cluttered Toys R Us, with boxes piled to the ceiling.

It is sandwiched between two of Toys R Us' biggest competitors: Target Corp. and a brand-new Wal-Mart Stores Inc. Supercenter.

Tour director Becka Martilla said traffic slowed during industry leader Wal-Mart's grand opening over Memorial Day weekend, but shoppers have now returned.

Geoffrey will match competitors' lower toy prices, but the activity aspect of the store means it is not in direct competition with discounters to the same degree as the regular Toys R Us stores.

The toy business isn't much fun for most of the year. Ringing up sales in the first three quarters is a constant problem in the toy industry, which packs in more than 50% of its sales in the fourth quarter alone.

Toy manufacturers and retailers often report losses in the first half of the year. A concept like Geoffrey could ideally help smooth out results through the year.

The focal point of the Geoffrey store is Studio G, a centrally located activity area where employees help kids with free arts and crafts projects.

There's a free story hour and large play space with 20-foot jungle gym. The store also hosts birthday parties -- for about $10 a child -- complete with cake, invitations, staff to organize games and activities, and decorations with themes such as Care Bears and Scooby-Doo.

On a recent Monday afternoon, a dozen or so children attended a party at the Geoffrey store in Fond du Lac, less than an hour's drive from Milwaukee. They sang songs, played with plush monkeys and talked about their favorite animals and the sounds they make.

Elsewhere in the store, a group of boys tossed Hover Discs, and a family browsed through the baby department.

The company has opened four experimental Geoffrey stores, combining toys, clothing and baby gear under one roof. It also has about a dozen "hybrid" stores, incorporating elements of Geoffrey.

The Geoffrey stores are in rural Wisconsin, Texas, Mississippi and North Carolina. In many ways, Toys R Us is following a strategy that worked for Wal-Mart. It is going into areas with underserved shopping populations and creating one-stop shopping -- but for kids.

"The store format makes sense for busy parents," said Reyne Rice, toy trend specialist for the Toy Industry Assn. "And toy manufacturers are interested in making sure the Toys R Us format works overall because they want to have more retailers."

The toy-selling environment has been weak, with slowing industry sales and bankruptcy filings by KB Toys and the parent of upscale FAO Schwarz.

Toys R Us itself is in the midst of an overhaul, which analysts believe will lead to toy store closures. It already shut down its Kids R Us and Imaginarium stores.

"The Geoffrey stores are doing really well," Toys R Us Chief Executive John Eyler said.

"They are fun, have a lot of activities and have knowledgeable staff so you can select just the right toys," he said. "We're using it as a lab to test new ideas."

Because of success at Geoffrey, Toys R Us stores now regularly host free activities, and they have rolled out a birthday club that lets kids set up wish lists and get phone calls from Geoffrey the talking giraffe, the company's mascot.

Jim Silver, publisher of Toy Book and other trade magazines, said, "It's not what you can buy at Geoffrey, it's what you can do. How can a toy retailer bring in consumers more than a couple times a year?

"If you can get them in for a haircut once a month," he said, "you're way ahead of the game."

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