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Should Toy Manufacturers Support Retailers other than Wal-Mart Wal-Mart Inc. is one of the American largest retail giants. The company offers consumers reasonable quality for low prices. By implementing effective cash management and distribution strategies, Wal-Mart undertakes all efforts to keep its prices extremely low, while making the company stronger and more successful. This information sounds too optimistic for Wal-Mart and, at the same time, it causes problems to its competitors.
Erin Brown claims that Wal-Marts success in selling toys may drive the No. 2 player, Toys R Us. According to Harris Nesbitt, an investment bank, Wal-Mart is supposed to have 22 % of the retail toy market compared to 16 % for Toys R Us and 10 % for Target. Toys R Us fails to compete with Wal-Marts extremely low prices: its stock is down 61 percent from its high in 1993. Toy sales and profitability, meanwhile, have fallen. Net earnings fell to $ 88 million in 2003 from $ 229 million in 2002 (Brown n. p. ).
John H. Enter Jr. , the chief executive of Toys R Us proposes to work out a strategy to battle the companys difficulties by probability of selling or shutting down some or all of the 683 Toys "R" Us stores in the United States after the holiday season (Brown n. p. ). Toy industry watchers are anxious about the possible outcomes these closures would have on industry, including leading toy manufacturers such as Hasbro, Mattel and LeapFrog. Possible closures of Toys "R" Us stores can lead to unexpected results as they put a pall over the whole group, having lost so many distribution channels (Brown n. p. ).
It is difficult to calculate the potential damage to toy manufacturers. For example, in 2003 Hasbro and Mattel derived 16 percent of net sales from business with Toys "R" Us (Hasbro $ 496 million and Mattel approx. $ 800 million). Although toy industry watchers do not predict that Hasbro and Mattel would lose these sales if the company closed its stores as other sales channels would pick up most of the slack (Brown n. p. ).
Yet, approximately 25 % of sales would not be picked up. Something should be done to solve the problem. Toys "R" Us remains one of the toy stores large enough to give toy makers enough shelf space to show off their entire product lines, and to do meaningful year-round test marketing, sometimes with wacky products (Brown n. p. ). Toy manufacturers seem to face hard times, because if Toys "R" Us doesnt make it, toy retailers may lose the most important showcase for a wide variety of toys, a much wider mix of business than a Target or a Wal-Mart would ever get into (Brown n. p. ).
If toy manufacturers loose their prized testing ground for toys, it will make them look harder at what licenses they take on. It will be very difficult for new toys to appear if they dont fit into an established brand, as toy manufacturers might not want to take the risk of an unproven or doubtful quality and might not want to take the risk of looking at a Pokemon or a Yu-Gi-Oh! or a Beyblade, which were anomalies that really took off (Brown n. p. ).
Obviously, toy manufacturers should undertake all efforts to create bold new concept toys and support retailers other than Wal-Mart (such as Toys "R" Us) by offering those retailers products they do not sell to Wal-Mart. Obviously, by conducting fair business it will not only maximize the profitability, innovations and responsiveness, but also improve sale channels and acquire new partnerships. Besides, manufacturers can explore new non-traditional toy sales channels such as bookstores, electronic stores, online merchants, to mention a few. Some toy manufacturers, who arent afraid of experiments, can carve out a permanent shelf space in non-traditional channels like drug stores, warehouse clubs (Craig n. p. ). They can also cozy up to a consumer electronics industry that has successfully rebranded itself as the new destination for fun (Craig n.
p. ) or experiment in retail outlets of their own. Finally, the toy manufacturers can expand their sale channels to include supermarkets and convenience stores, combining their products with other accessories or foodstuff for children like sweets, or even develop their sales through confectionery channels. Bibliography Brown, Even. (September 12, 2004). Imagining Toyland Without One of Its Giants. The New York Times. Craig, Tim. (November 8, 2004).
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Research essay sample on Wal Mart Toys R
