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Toys 'R Us Looks for Its Own 'Missoni Moment'

Toys 'R Us is ratcheting up the number of exclusive and store-branded products it will sell during this upcoming Christmas holiday season.

Photo: Christina Cheddar-Berk

The expanded effort, which may have been foretold by the company's hiring of long-time Mattel executive Neil Friedman as president earlier this year, will be supported by direct-mail efforts, social marketing, and TV advertising.

Speaking with reporters Wednesday, Chairman and Chief Executive Jerry Storch declined to comment on how much money the company will spend to promote these items, but it appears to be the cornerstone of its holiday strategy.

Toys 'R Us said its exclusive items will come in various forms. The items will include its own store brands, such as Imaginarium, Totally Me arts and craft items and Fast Lane radio controlled vehicles, among others, but there also will be products made by other toy manufacturers under their own brands. These include a retro version of Cabbage Patch dolls (manufactured by Jakks Pacific ), a return of Mattel's classic Malibu Barbie dreamhouse, Fisher-Price's Geotrax Batman playsets, and Chuggington trains, among others.

In addition to the circular it will mail out this week highlighting its exclusives, Toys 'R Us hopes to build a following for its Moshi Monsters line, its Trash Pack collectibles, and its Air Swimmers flying fish balloons through TV ads.

Moshi Monstersis an online virtual world game for children. Although it has a U.S. following, the accompanying physical products, which are made by Spin Master, have not been available in this country. Purchasing these products allows players to unlock additional game features online, and lets them continue to interact with the brand offline.

Toys 'R Us is hoping that Trash Pack will be a hot collectible for young boys, much the same way Blip's Squinkies, one of last year's surprise hit toys, was for girls.

Photo: Christina Cheddar-Berk

Children will be able to collect the the little trash monsters, which are squishier and stickier than Squinkies pieces, and play with them in garbage truck playsets.

Toys 'R Us also snagged a deal to sell Air Swimmersunder its Animal Planet brand. The product received at lot of buzz at this year's New York Toy Fair in February, where it was demonstrated by its developer.

There will be two designs, a clownfish and a shark, and both will sell for about $49.99. (A helium tank, which is needed to inflate the fish, will cost an additional $19.99.)

If exclusive items resonate with consumers, they are a great way for a retailer to break out of competing solely on price and eroding profit margins in this tough economy. With consumers increasingly researching product prices and easily shopping where they find the best deal, retailers have been turning more aggressively to exclusive items.

The strategy has been very successful for retailers. Target certainly saw a surge in demand this week when it released its Missoni brand. Demand was so robust that shoppers crashed Target's website several times, and product sold out within hours. Kohl's is hoping to build buzz with its Jennifer Lopez and Marc Anthony collections, which will be released this fall.

There are two tricks to this game, however. First, retailers have to market products that are desirable enough to get customers into the stores. Then, they need to sell these products in a way that doesn't damage their relationships with their existing manufacturing partners.

Selling exclusive items is only one element of the toy retailer's strategy.

Toys 'R Us also will put a lot of emphasis on its e-commerce opportunities, including the ability for shoppers to order products online or on mobile devices, and then pick up purchases at the store.

As it has in the past, Toys 'R Us will open temporary stores, or pop-up shops, during the holiday season. Storch declined to provide the specific number of stores, saying details were still being finalized. The company anticipates, however, that it will be somewhere between the 90 pop-up stores it opened in 2009, when it first employed this strategy, and the 600 stores it opened in 2010.

A portion of those stores remained open after the holiday season in each of the two years, Storch said.

Toys 'R Us is committed to making sure it has the hottest holiday toys in stock, he said.

"That's another way to have exclusivity," Storch said. "By being the only one who has the product on Dec. 23."

Storch declined to say how he expected consumers to behave this holiday season.

"It's certainly reasonable to expect the economy will be sluggish for a long time to come," he said.

Photo: Christina Cheddar-Berk

However, he also noted that Toys 'R Us has been able to post positive same-store sales growth for the past five years.

One factor that has helped Toys 'R Us has been the fact that parents will often prioritize buying toys for their children, even if that means scrimping on themselves.

Still, the company does have some challenges this year. For one, video game hardware and software sales have been weak, hurt by a dearth of new products.

He expects popular titles, such as Activision's "Call of Duty" and its Skylanders, which blur the line between toys and videogames,to generate sales. Skylanders incorporate action figures that connect to a game console as part of its play.

Luckily for the bottom line, video games tend to be low-margin products, while exclusive toys such as the nearly 350 products Toys 'R Us will promote in this week's catalog, tend to have higher margins.

Questions? Comments? Email us at consumernation@cnbc.com. Follow Christina Cheddar Berk on Twitter @ccheddarberk.

Retail