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Toys 'R' Us Introduces New Holiday Reservation Plan and Tablet for Kids


Toys 'R' Us is determined to resist the changes online retailers are bringing to its business, and avoid the fate of Best Buy.

MINYANVILLE ORIGINAL If there is any time Toys 'R' Us can feel confident, it's in the days leading up to the holiday season. Historically, Christmas time has always been its highest selling period, so much so that it routinely has to hire temporary staff just to deal with the demand spike. However, as one would expect, the toy retailer's profits have been slowly cut into by online retailers such as Amazon (AMZN). Consumers are beginning to prefer Amazon, not only for the ease of selection, but also because of their desire to avoid the famous holiday grab-wars that are unavoidable at big-box retailers.

In an attempt to sidestep Best Buy's (BBY) fate of becoming nothing more than a showroom Amazon, Toys 'R' Us has recently unveiled a new holiday reservation program to help assuage its customers' fears of long lines and fierce competition for holiday toys. The new plan will allow customers to put a 20% down payment on up to 50 items through Halloween; the items should be made available for pick-up around December 16. There is one caveat, though: All reservations must be made in stores and picked up after arrival.

Finding news ways to get customers into stores is a frequently used method of increasing sales. It keeps the store a part of the customer's routine, and of course, it's impossible to take a kid to a Toys 'R' Us without buying them something.

Having customers on site may also allow Toys 'R' Us to showcase its biggest advantage over Amazon: service. According to an article by MarketWatch, an independent survey stated that 38% of toy consumers prefer Toys 'R' Us' service, whereas Amazon only garnered 8%, with Wal-Mart (WMT) and Target (TGT) receiving 6% and 10% respectively.

The company's CEO, Jerry Storch, remains optimistic for Toys 'R' Us' future, stating that the company still has a place in the market, and that the "Internet changes everything, but it doesn't replace everything."

The new reservation plan also presents the company with a great opportunity to market its new tablet for kids, the Tabeo. The device targets kids between the ages of five and 10, and comes preloaded with 50 different apps and parental control capabilities. Because of the target audience, the Tabeo might not be considered a direct rival for other tablet makers.

While not as high-tech as Apple's (AAPL) iPad or Amazon's Kindle, the Tabeo will be priced affordably at $149.99 and will only be made available through Toys 'R' Us' stores and website. Toys 'R' Us is confident in its decision to make this an exclusive product and believes it will be profitable: Its private-label products have grown 30% from 2006-2011, and Storch believes the business will double, if not triple, over time.

Indeed, Toys 'R' Us seems poised for further growth. In response to its layaway sales surging three times last year, the company has agreed to waive its $5 fee to encourage more customers to use it. In addition, the company plans to open 150-200 pop-up stores in the next year. To compete further with Amazon, Toys 'R' Us is also planning to focus on Internet sales, which brought in around $14 billion in revenue last year.

By concentrating on its stores while updating its Internet capabilities, Toys 'R' Us plans on playing to its own strengths while pushing Amazon out of its territory. If successful, other retailers would be wise to take note of Toys 'R' Us' strategies before Amazon renders them irrelevant.
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