chains like Zany Brainy and Imaginarium and the closing of up to 500 KB Toys outlets.
"There are a number of small, independent chains with a few stores that do a great job and are real niche players," said retail analyst George Whalin. "They attract consumers who look for service and unique products rather than low prices."
Brian Miller, who owns a four-store chain based in San Diego called Geppetto's, said his stores have thrived during the past few years and that he expects that trend to continue.
"We had a very good year and a very good fourth quarter," said Miller. "And I see a lot opportunity for business to grow this year for my stores and for other independent retailers."
One of the largest retailers in that category is Learning Express, a 107-store franchise chain based in Ayer, Mass. During a holiday season that was a disaster for toy specialty chains, Learning Express emerged largely unscathed.
"The hit we felt was from competing against all those liquidation sales of stores located near us like Zany Brainy," said Learning Express president Joe Diaz. "But once those sales are through, our stores will be in a position to feel a direct positive impact."
Learning Express owner Gene Thistle agrees with that assessment. He said sales at his store in Sunnyvale, Calif., were down about 8% in December but attributes the dip primarily to the fire sales being conducted by competitors.
"We're starting out soft this year, but I think that's due to the ongoing liquidations," said Thistle. "But now we're in a position to take advantage of a shift in the cycle."
Retailers like Learning Express were able to avoid the effects of the holiday price wars by not getting caught up in what turned into a vicious cycle for many retailers: lowering prices and sacrificing margins to lure customers.
"We are surprisingly competitive on price with most products, but we did not enter the fray [of lowering prices] at all," said Diaz. "What we did was ramp up on customer service even more than usual, because that's always been our key point of differentiation."
Sticking to a service-oriented business model is also what helped Creative Kidstuff, a regional chain based in Minneapolis. The retailer has six stand-alone locations along with six airport stores and toy departments in 21 Marshall Field's.
"We had a phenomenal fourth quarter and we didn't even go promotional," said Roberta Bonhoff, president of Creative Kidstuff. "And we didn't go promotional because we can't play that game. All we can do is stick to who we are."
Bonhoff said she expects her stores to pick up more business this year from customers who will be displaced by the closings of hundreds of toy specialists. But while smaller retailers will benefit from the shakeout, the same isn't true for suppliers.
"The people who will really be hurt by all of this are the manufacturers, and my heart really goes out to them, said Bonhoff. "They're not only losing a lot of customers, but they're going to lose a lot of money as a result of all those Chapter 11 filings."
The store closings could be hard on some vendors, particularly small suppliers that will be losing their largest accounts. "This business is made up of a lot of small companies, and they're the ones who will feel the pain," said Whalin.
But even small companies are not likely to shut down because of the loss. "It may be hard on them in the short term, but a company with good products is not going to shut down because it hits a bump in the road," said analyst Chris Byrne. "They'll just get out there and look for other channels of distribution."
For small toy retailers, that could mean more hands-on attention from suppliers as their status in the retail world rises. "By and large, we've been treated as being a little more special in recent months," said Diaz. "I think people are making more of an effort to reach us now because if you can get your products into 80% of the stores in a chain our size, that means a lot more than it used to."
Toy industry veteran Ron Goldfinger agrees that small toy retailers will be getting calls and visits from suppliers that were out of their league just a few months ago.
What's happened over the past few months totally changed the retail landscape," said Goldfinger, ceo of Distributoys in Chicago. "There aren't as many opportunities for manufacturers to increase their distribution now, so retailers will be getting attention from people who never noticed them in the past." |
