Sunday, January 14, 2001
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Posted on: Sunday, January 14, 2001

Toys R Us chief woos back customers

Associated Press

NEW YORK — The last time Jennifer Romanello shopped at Toys R Us was a year ago, and she vows she’ll never return.

"It scared me away," the 35-year-old mother from Woodmere, N.Y., said. "I didn’t get any service. The store was so overwhelming. I need knowledgeable help. And I don’t like reaching for things that are 10 feet high in the sky."

Romanello now shops at such specialty stores as The Right Start and Zany Brainy, which she believes offers better help.

Wooing back dissatisfied customers like Romanello is one of several big challenges for Toys R Us, which has seen a dramatic erosion of market share since 1994. It used to be the world’s No. 1 toy seller, but lost that distinction to Wal-Mart two years ago.

John Eyler, president and chief executive of Paramus, N.J.-based Toys R Us, is pushing to reverse fortunes of the $11.9 billion chain he has headed for a year.

That means keeping hot toys in stock, ordering merchandise earlier and expanding its exclusive toy offerings to improve profit margins.

Eyler, who came over from high-end toy marketer FAO Schwarz, is also overhauling customer service by moving more sales clerks and toy specialists to the floors. And the supermarket-style store aisles are being scrapped in favor of clustering products at eye level.

So far, Eyler has redesigned 166 of the Toys R Us’s 706 U.S. stores, with the rest to follow suit over the next two years.

Eyler’s initiatives could be paying off — holiday sales at Toys R Us easily beat Wall Street expectations in the weakest retail environment in perhaps a decade. From January through November of last year, toy sales declined 0.6 percent, compared to the previous year’s gain of 8.5 percent, according to The NPD Group, a research firm based in Port Washington, N.Y.

The new chief executive also believes the chain was able to win back some market share last year, though he’s not sure where it came from. Meanwhile,, which teamed up with in August, saw sales more than triple from a year ago.

"Given the tough retail environment, it was nice to see Toys R Us pull through," Melissa Williams, an analyst at Gerard Klauer Mattison. "It was definitely a tough environment."

Eyler promises even more growth.

He believes the company’s 100,000-square-foot flagship, to open this fall at Times Square, can draw 25 million visitors per year — twice as many visitors to the Statue of Liberty and the Empire State Building combined.

The store, which Eyler estimates will be profitable in a year, will have an indoor Ferris wheel; a two-story, life-size Barbie house with its own elevator; and a 30-foot-tall dinosaur.

"We want to create the center of the toy universe," Eyler said.

Eyler sees other changes that could spark a new growth phase: expanding the international business and the successful Babies R Us stores, and retooling the lagging Kids R Us division, which sells clothing and accessories.

The company is testing a new Kids R Us prototype in Freehold, N.J., and plans to open six more stores this year. Eyler sees the potential for several hundred more Toys R Us stores in the U.S. under a new, unspecified format over the next three to five years.

Bottom line for Eyler — he wants Toys R Us "to be the most family-friendly store ... Shopping for toys is supposed to be fun."

Toy retailing lately has been anything but fun. The lack of a hot toy last holiday and competition from stores that sell electronic gadgets like DVD players and video games have caused headaches. On top of that, they’re struggling with how to build profits in a low-margin business.

But stopping the market penetration by discounters will be the biggest challenge for Eyler. Neither of his two predecessors were unable to accomplish the task. But Eyler isn’t focused on winning back the top spot: he believes that both Wal-Mart and Toys R Us can both increase market share.

"Our strategy of creating a much better environment affects everyone’s view of shopping for toys," he said. "We see this as gaining share throughout the industry."

Toys R Us has seen its share drop from 21 percent in 1994 to 15.6 percent in 1999, according to The NPD Group. Over the same period, Wal-Mart’s share increased from 14.1 percent to 17.4 percent. Analysts are awaiting the 2000 market share results, which are due out in about a month.

"Eyler is doing everything he can, but at the same time he is facing an intense and bloody market share battle," Kurt Barnard, publisher of the Barnard Retail Trend Report, based in Upper Montclair, N.J. "His ultimate success should be judged by how the retailer’s discount rivals do. Even though Wal-Mart didn’t do so well this past holiday, I bet that its toy sales sparkled."

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