Like every other shopper in the US enjoying last-minute bargains offered by major retailers, housewife Cindy Miller is busy shopping for the perfect presents for her kids. Instead of visiting traditional toy stores to look for her ideal toys, she decides this year to get all her shopping done under the roof of Wal-Mart. "I still like to go to specialised stores like Toys R US," she explains, "but the low-priced toys I find at Wal-Mart are simply too good for me to ignore."

Cindy Miller is not alone. More and more consumers, in particular those who are in need of toys and children-related products, are now choosing to shop at Wal-Mart (which, initially, was not a specialised toy-selling chain to begin with). The Wal-Mart chains are now luring in shoppers with a variety of merchandise at the lowest prices consumers cannot find elsewhere. The unbeatable bargains seem to be welcomed by consumers alike, who are constantly on the look out for the best deals possible, especially during the peak shopping periods.

It's all in the numbers
Toys R Us, an American toy-retailing empire, taking pride on its specialty stores and variety of toys, has been serving millions of households since its opening in 1978. The retail giant is now wrestling to survive even though it is still on top of the list as the world's largest toy retailer.

The story began a few years ago, when discount chain stores such as Wal-Mart began to spend much marketing effort to generate traffic during the holiday seasons. It has been reported that despite the aggressive marketing effort, Toys R Us still recorded a 1 per cent drop in sales over the 2003 Christmas holiday season, while Wal-Mart claimed a sales rise of 2.3 per cent during the same period. The upside figure is further encouraging Wal-Mart's ambition to conquer the world of toy retailing, as Mr Lee Scott, Wal-Mart's chief executive commented "The toy division is a very profitable category for Wal-Mart with a very strong gross margin...we are very encouraged about toys and our positioning in that particular market. I am excited, I do not feel particularly compelled to apologise for it."

The "Wal-Martisation" phenomenon
Founded in 1962 in Arkansas, US, Wal-Mart is currently operating with 3, 550 stores scattered across US, and is also known as the world's largest retailer. Striving to provide with customers a value-for- money shopping experience, the retailer is well-known for its enormous product variety and the low price range attached, helping it lure more consumers than Toys R Us in the toy division. How is the newly emerged "Wal-Martization" changing the US and the rest of the world? The leading discounter rides on the following cutting-edge statistics:

The retail giant surely knows what its consumers want and has done much better to meet their needs than its competitors. "One of Wal-Mart's strategies is to undercut several 'must-have' products to boost traffic," said Geoff Wissman, vice president of its consultants Retail Forward.

What gives Wal-Mart another impeccable edge is that it has such a wide variety of products in its stores that one visit to Wal-Mart is enough to satisfy a consumer's daily need in almost every aspect: from clothes to food to kitchenware to electronic goods to toys, the list goes on. The product diversity, which cannot be found at Toys R Us, provides a perfect one-stop, hassle-free shopping experience for every consumer entering the stores despite their different backgrounds and preferences.

Specialised toy stores - once the leader, now on the edge?
Toys R Us, on the other hand, has been working hard to capture and retain consumers' attention. Over years of development and expansion, the company has become the leader in the toy-selling industry with its headquarters located in the US and stores spread across the world, operated by a total of 65, 000 employees. Despite the USD $116 million spent on advertising last year, the renowned toy retailer chain has posted a net loss of USD $38 million, while having to close down all of its 146 Kids R Us stores and 36 Imaginarium stores across the US due to underperformance.

While troubled with such weakening sales results, Toys R Us should consider itself one of the fortunate ones, as the intense price war has in recent years cost the lives of a few long-established, reputable toy stores, driving these "victims" to the road of bankruptcy. A perfect example would be the closing of FAO Schwarz in the US. A prestigious toy retailing icon famous for its one-of-a-kind merchandise, FAO Schwarz was eventually defeated by drastic competitors such as Toys R Us and Wal-Mart towards the end of year 2003. FAO Schwarz was forced to seek bankruptcy protection twice and is still searching for prospective buyers to take over the business. In the Securities & Exchange Commission filings, officials from FAO Schwarz even pointed out specifically that the throat-cutting competition with discount chain stores was causing the devastating threat to their business survival. Another toy giant trapped in the very same destiny was KB Toys Inc, which used to be one of the largest toy retailers in US but has filed for bankruptcy in January 2004. The bankruptcy has resulted in the closedown of 350 KB Toys stores, as well as 3, 500 employee layoffs.

Restructuring tactics to make a turnaround
Fighting back is no picnic for Toys R Us, despite its abounding experience in the field. On the whole, the company is still holding up nicely due to its effective marketing strategy developed over the years. Understanding that it is not always wise to put all its eggs in one basket, Toys R Us has learned to diversify to net as many sources of revenue as possible. This explains the launching of many of its other divisions, namely Toys R Us International, Kids R Us, Babies R Us, Imaginarium, as well as Toysrus.com. Investments in these divisions had proven to be paying off well, as sales figures in recent years have shown that they do play a crucial role in generating business revenues for Toys R Us. For instance, Babies R Us, which currently has 199 stores operating in the US, achieved a profit of USD $202 million in 2003. Decision makers at Toys R Us are positive about Babies R Us's future, as Jon Elyer, the company's Chief Executive said recently that the baby division has definite potential to achieve "a very solid earnings performance for the full year". The uplifting financial results and market response in the babies' department can be attributed to the emerging social trend in which parents are now spending more on babies than ever before. This new tendency provides an explanation for the company's move to close down underperforming Toys R Us stores in exchange of the Babies R Us division's expansion. Such restructuring plan is welcomed and encouraged by many investors and analysts, who have expressed concerns over the company's seemingly unfavorable future.

While shutting down stores that are not performing well, Toys R Us has also learned to utilise its existing stores to a greater extent. The company is now projecting a new division called "Geoffrey" in order to better compete with Wal-Mart. Named after the company's mascot, Toys R Us is expecting the brand new division to upgrade shoppers' toy-purchasing experience by providing value-added services such as hair-cutting, as well as party rooms which can be used to hold special events catered for children. Stores in the US also hold regular seminars and talks on subjects ranging from parenting to anything children-related to generate in-store traffic, while giving consumers an extra incentive to visit the stores.

Meanwhile, the company's official website, toysrus.com (which operates in alliance with Amazon.com) reported an encouraging 2.8 per cent increase in sales over the holiday seasons last year. As the internet continues to become a popular shopping platform, Toys R Us is expecting more consumers looking for their merchandise online in the future. The company's website is currently the most-visited online toy store in the US.

On the other hand, Wal-Mart is gradually catching up on the online shopping craze with its fast-improving official website. With its corporate dotcom division based in Silicon Valley, US, Wal-Mart's online store combines expertise in technology with its thorough knowledge in retailing to swiftly complement its existing stores.

Though Toys R Us seems to be losing its local consumers in midst of stiff domestic competition and ever-changing shopping pattern, its local shortfall is counterbalanced by an increasing number of consumers base worldwide. With its very first overseas stores opening in Singapore and Canada back in 1984, the company's international unit has now grown to a worldly toy empire with 573 international stores in 27 countries. The company has recently revealed a slight increase in international store sales in local currency.

The war will go on
Almost no business sectors can be exempted from the troubles of the unpredictable global economy, which is now even more fragile than ever since terrorism struck across the world in 2001. Toys R Us is now facing another battle with Wal-Mart, which has been working closely with amazon.com to leverage the online commerce pioneer's expertise. Nevertheless, the future may not be all that gloomy for the Toys R Us after all, as its effective marketing strategies will give the toy veteran an edge to outwit the rivaled chain store next door. Under the crossfire of heated price war, it seems that the consumers have now gotten the upper hand and will be claiming triumph and reaping the benefits in it.