Toys "R" Us, a poster child for failure on the Internet in the 1999 holiday shopping season, is expecting a much kinder Santa Claus this year.
With a new ad agency about to come aboard for its dot-com unit, Toys "R" Us is poised to make a major leap in its brick-and-click play to integrate its retail and online businesses. The toy seller expects the entire business to have a healthier holiday season than recent years.
"It's a case of the tortoise and the hare and we were the tortoise," said Warren Kornblum, senior VP-chief marketing officer for Toys "R" Us, who joined the company in 1999 from Bozell Worldwide, New York, where he was a managing partner. "There was a race (among dot-coms) at the end of 1999, but we weren't running a one-year race," he said. "The good news is the power of our brand."
REASONS FOR OPTIMISM
Several elements will buoy the overall toy market this year, Mr. Kornblum forecast. For one, he is optimistic about toy products licensed from three new holiday movies. They include Jim Carrey in Imagine Entertainment's "How the Grinch Stole Christmas," based on the Dr. Seuss holiday tale. In addition, Walt Disney Co. will release "102 Dalmations" and Nickelodeon, "Rugrats in Paris: The Movie."
In-store ventures, such as a line of Home Depot-branded tools for kids, have been successful, he said, and Toys "R" Us will consider other alliances.
Toys "R" Us, meanwhile, also has tapped a number of licensing deals, such as one with cable TV network Animal Planet to create a line of 100 branded toys. Others will follow, Mr. Kornblum said.
He said a series of new toys coming on the market this year and new twists on old-timers should draw buyers.
Mr. Kornblum plans to pepper the season with sales promotions, including marketing backed by Toys "R" Us' partners, such as Mattel's Barbie months, in which it features appearances by a Barbie character, and specials on two-wheelers during bike month.
Toys "R" Us also is overhauling its more than 1,500 stores worldwide. The aging warehouse look has been redesigned to be more appealing and navigable. An extensive plush animal section also has been added to stores. Plus, Toys "R" Us' recent acquisition of Imaginarium, a small toy chain that prided itself on sales help called "toyologists," has brought a new philosophy into the giant retailer: Salesmen will be trained to demonstrate toys. Samples also will be available for children to try out on their own.
"John (Eyler, Toys "R" Us' new president-CEO) personally is absolutely passionate about raising the level of guest services," Mr. Kornblum said.
BEGINNING TO SURPASS ETOYS
In-store is not the only concern of the toy giant shamed by eToys last holiday season. Toys "R" Us had its online spirits lifted by traffic indicating it's beginning to surpass eToys.
Additionally, the majority of visitors use the brand name to go directly to the Web site with only 25% of traffic coming from links on partner Internet portals, showing brand recognition is starting to pay off, Mr. Kornblum said.
The moves come at a time when a number of online competitors have closed their cyber shops, including ToyTime.com and the Disney-backed Toysmart. Toysrus.com earlier this month acquired the inventory of RedRocket from Nickelodeon. Those products will wind up as a boutique on Toysrus.com, selling Rugrats, Blue's Clues and Wild Thornberrys and other Nickelodeon products.
Toys "R" Us has taken other steps to prevent being haunted by the ghosts of Christmases past. Last holiday, parents were notified at the last minute that gifts ordered well in advance wouldn't be arriving. Toys "R" Us tried to make good with $100 gift certificates, but many customers were disappointed. This time around, Toys "R" Us has established three distribution centers to avoid running out of stock.
Eventually, Toys "R" Us plans to offer customers--whether they order a product over the phone, through the mail or online--a choice of having the product delivered or picking it up at a local store, Mr. Kornblum said.
DOT-COM SPENDING TO HIT $25 MIL
Leo Burnett USA, Chicago, is Toys "R" Us' agency of record; in 1999, the company spent $75.4 million on advertising, according to Competitive Media Reporting. Spending on its dot-com unit, $7.6 million last year at Burnett, is anticipated to rise to $25 million. Final presentations in the pitch for the dot-com business, conducted in Los Angeles last week, included Citron Haligman Bedecarre, San Francisco; Doner, Southfield, Mich.; and D'Arcy Masius Benton & Bowles, Los Angeles. A decision is expected within the next one or two weeks. Incumbent Burnett was involved in earlier stages of the review.
"At the end of the day, it's not about investment banking. It's not about e-commerce," said Mr. Kornblum. "It's about a consumer-centric proposition."
Analysts and competitors alike aren't counting Toys "R" Us out of the game.
"Toys 'R' Us has gotten it," said Seth Geiger, VP-professional services, Bizrate.com, of the toy company's Internet strategy. However, he cautioned, "It remains to be seen how well they will be able to perform."
Said an executive at a retailer that also sells toys: "People come to our store to buy other things and they might buy toys. But people go to Toys "R" Us to buy toys. I expect they will do just fine."
Copyright June 2000, Crain Communications Inc.