Holiday crunch time: Toys R Us ad touts price cuts

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Toys R Us, which four years ago ceded first place as the nation's top toy seller to Wal-Mart Stores, this week breaks an ad campaign with the potential to ignite a dangerous price war with the industry leader.

The toy retailer will air a spot nationally using its mascot, Geoffrey, answering reporters' questions at a news conference. He discusses the retailer's remodeled stores and improved service, but then mentions lowering prices on about 100 top-selling toys.

"We want to neutralize price as a competitive disadvantage," said Warren Kornblum, chief marketing officer, adding that the "last thing" the retailer intends is to undercut Wal-Mart's prices. "Clearly price wars are not healthy," he said.

In May, Toys R Us Chairman-CEO John Eyler said he would take "appropriate" action to counter "embarrassment" of Wal-Mart's lower prices.

Last year, another Wal-Mart competitor, Kmart Corp., embarked on a risky price-cutting marketing program, Blue Light Always, which cut prices on the store's most popular items, a program cited by analysts as a major contributor to Kmart's Chapter 11 bankruptcy filing. Toys R Us also was the target in the late 1990s of a Federal Trade Commission probe into the toy retailer's use of market share to keep prices high.

`hard road'

Howard Davidowitz, chairman, Davidowitz & Associates, a New York-based retail consultant, said Toys R Us, one of the original power retailers, is trying to differentiate itself from Wal-Mart. "It's a hard road and I don't know if they will be able to do it," he said. However, he believes Toys R Us is stronger financially than Kmart. "This is not another Kmart," he said.

Spending on the campaign is expected to hold steady with last year at this time, Mr. Kornblum said. Toys R Us spent $78.8 million in 2001, some $50.2 million of it during the holiday season of October through December. The retailer will run additional spots for Thanksgiving and the holidays to back its toy catalog.

A year ago, Toys R Us began rolling out the new Geoffrey commercials, building the cartoon giraffe into a three-dimensional puppet under agency Publicis Groupe's Leo Burnett USA, Chicago. Two of last year's Geoffrey spots will air along with the news conference spot.

Toys R Us has spent more than $500 million to open its Times Square flagship and to remodel some 700 stores from their original warehouse look to one that segments the store into separate departments, such as Animal Alley, which features plush toys. The plush assortment is one of a number of areas Toys R Us has padded with private-label product in an attempt to differentiate itself from the discounters and to help shore up profits.

contributing: kate macarthur

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