Friday, April 3, 2009

Retail Memo - Alternate Formats: Toys 'R' Us Testing Store-Within-Store 'R Market' Grocery Departments in Three Chicago-Area Toys 'R' Us Toy Stores

Will All Retailers Become "Grocers"?

The Toys "R" Us toy store chain has never been just for kids. After all, it's mom and dad who have the cash. Plus, we all know mom and dad also love shopping at the toy stores nearly as much as the kids do. After all, doing so can be the retail version of the fountain of youth, at least until checkout time.

But if what the New Jersey, USA-based retailer appears to be up to from a merchandising standpoint in at least three stores in the metropolitan Chicago, Illinois market is a harbinger of things to come for the chain's hundreds of other Toys "R" Us branded retail stores in the U.S. (and perhaps internationally), mom and dad might just have a far more practical reason for shopping at the toy superstores on a much more frequent basis. [The retailer operates a total of 846 Toys "R" Us toy superstores (about 600) and Babies "R" Us stores in the U.S. Additionally, it operates 700 stores internationally, in 32 countries, along with having four online stores.]

What's the mega-toy store chain up to?

Toys "R" Us has remerchandised three of its Toys "R" Us flagship toy stores in the Chicago area to include a selection of shelf-stable food, grocery, beverage, snack and household packaged goods items.

The packaged goods items are being merchandised in a store-within-a-store department setup in the toy superstores, which has been named "R Market."

The grocery store-within-the-toy store is clearly set-off with colorful green signage featuring the "R Market" name, according to a Natural~Specialty Foods Memo (NSFM) correspondent who visited one of the stores this week.

The perimeter of the "R Market" department features primarily household-oriented packaged items like bath tissue, paper towels, laundry detergent, cleaning supplies and similar related goods. It's the draw, the lure, into the store-within-the-toy store.

Inside the "grocery store" gondolas are stocked with a limited assortment of shelf-stable packaged goods and beverages representing numerous categories. Among the items include beverages such as juice, bottled water and various types of drinks; breakfast cereals, cereal and nutritional bars, cookies, crackers, various types of snack foods, and an assortment of other packaged foods.

There's also a full aisle dedicated to baby foods and drinks, a fitting tie-in for the Toys "R" Us core offering, which are toys and related products for kids of all ages.

The retailer has carried baby-related packaged goods items like disposable diapers, wipes and the like for some time in its stores. But a full-section of baby consumables is unique to the three Chicago-area test stores.

The grocery department also features a wall of candy. The wall of treats has a header at top that reads "Candyland," according to the NSFM correspondent. That signage is a tie-in to the popular "Candyland" board game, which is one of the chain's all time top-sellers.

The Toys "R" Us consumables and packaged goods store-within-the-store carries a mix of well-known national brand products, along with an assortment of lessor-known brands. There's also some natural, organic, specialty and healthy food, grocery and beverage items on the shelves.

Big brands include General Mills (cereals, snack bars), Kellogg (cereals), Gerber (baby), Proctor & Gamble (laundry detergents, bath tissue, paper towels, disposable diapers and related household items), Nestle (packaged goods and beverages) and some others.

Proctor & Gamble items like Pampers, Bounty Paper Towels and Charmin Bath Tissue are featured at discount prices on pallet-style displays on the floor inside the store-within-the-store area.

Among the natural, organic, specialty and healthy food and beverage items include: Barbara's Bakery (cereals, snacks), Kashi (cereals and related items), Dr. Sears' brand organic snack food items, Nestle nutrition items, Apple & Eve's Fruitables fruit drinks, and Clorox's and Seventh Generation's "green" household cleaning items.

Our correspondent also reports that there is some cross-merchandising in the "R Market" store-within-a-store department, featuring related consumable items and toy items, which is a logical and smart merchandising move.

Additionally, there's some cross-merchandising tie-ins with baby food and baby products in the aisle dedicated to baby and toddler consumables.

Further, a number of healthy, natural and organic snack and beverage items targeted to kids were also displayed on endcap-type displays in the department.

Toys "R" Us is keeping hush about the three store test, not publicly commenting on what it is up to, or if it's more than just a test. We call it a test because we spoke this week with a representative of one of the companies supplying grocery products to the toy store chain, who told us from what he has been told the "R Market" department and remerchandising scheme is just that for now -- a test.

It appears Toys "R" Us is attempting strategically a few things with its limited assortment, store-within-a-store "R Market" consumer packaged goods sections.

First, based on the item selection, the retailer has selected consumable and other packaged goods products that (1) primarily complement its core target demographic: toys and related goods; and (2) it's mixing that core shopper demographic-focused limited assortment with a selection of basic household items targeted to adult shoppers who are likely to pick up a few things on impulse (cleaning products, bath tissue, ect.) while taking their children toy shopping. The retailer has seen this to be the case in the past with items like disposable diapers.

And of course, the focus on kid-related breakfast cereals, juices, snacks and other consumables fits both of the criteria described above. Kids will ask mom to buy the juice boxes, candy and snack items, for example, along with mom grabbing some needed household items, especially if the price is right.

This is our analysis. As we said, Toys "R" Us isn't commenting publicly at present on the development.

With nearly 600 flagship Toys "R" Us stores and about 250 Babies "R" Us stores, the retailer could feasibly move lots of volume of consumable and other packaged goods items nationally were it to install the "R Market" departments in all of its 846 U.S. units. (We would think the focus would be more limited in the Babies "R" Us stores, concentrating on baby and toddler foods and the like.)

We also suspect the current economic recession has much to do with the development or test of the consumables/packaged goods departments in the three Chicago-area Toys "R" Us stores. After all, consumers aren't buying much in the way of durable items like toys at present.

In fact, Toys "R" Us just introduced what it calls $1, $2 and $3 value toy sections in the front of all of its flagship stores as a way to add value and create sales in the down economy. [You can read more about those new departments here.]

A very popular and long running advertising campaign jingle from Toys "R" Us features a person singing: "I don't want to grow up... I want to be a Toys R" Us kid."

It appears, based on the three store test, that if the retailer decides to put the limited assortment, petite grocery departments in all of its toy superstores, adults will have another reason to be even more frequent "Toys "R" Us kids," along with their children, picking up toilet paper, breakfast cereal, laundry detergent, and healthy snacks and drinks, along with toys and board games, at the toy superstores.

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