Toys "R" Us goes to Japan
Toys “R” Us Goes to Japan
Toys “R” us, the giant “category killer” in toys, represents a very special king of firm. The category killers are specialty retailers that operate on a much larger scale than the typical boutique specialty retailer. Examples include Home Depot in hardware and Best Buy in home appliance and consumer electronics. Wal-Mart, other superstores, and discount outlets threaten these specialty retailers. Toys “R” Us was bought out by an American consortium in 2005, but has continued to operate with fewer stores. The Japan operation has continued, managed as a separately incorporated subsidiary in Tokyo. At the time of its Japanese entry, the question was mainly whether its retailing formula could succeed in such a different market environment. The Toys “R” Us case shows how high barriers to entry can be overcome, at a cost, and how protected business easily become uncompetitive. The case also demonstrates how a new service format requires promotion that educates customers about its advantages. Toys “R” Us, Inc., a children’s clothing specialty retailer concentrating on toys and children’s clothing was headquartered in Paramus. New Jersey, In the early 1990s, after successful penetration of the North American market and selected European markets, company executives were formulating their expansion plans for the Japanese market.
COMPANY BACKGROUND
Toys “R” Us was, by early 1990, the largest toy retailer in the world, with about 20-25 percent of the U.S market, and 2 percent of total international sales. It was founded in the late 1940s by an American. Charles Lazarus, as the first “toy supermarket,” and was acquired in 1966 by department store chain operator Interstate, Inc. Interstate went bankrupt in 1974 after becoming overextended through buying a number of discount chains, but continued to build more Toys “R” Us stores through a court-ordered reorganization. After the reorganization was finished in 1977, Interstate divested all
Toys “R” us, the giant “category killer” in toys, represents a very special king of firm. The category killers are specialty retailers that operate on a much larger scale than the typical boutique specialty retailer. Examples include Home Depot in hardware and Best Buy in home appliance and consumer electronics. Wal-Mart, other superstores, and discount outlets threaten these specialty retailers. Toys “R” Us was bought out by an American consortium in 2005, but has continued to operate with fewer stores. The Japan operation has continued, managed as a separately incorporated subsidiary in Tokyo. At the time of its Japanese entry, the question was mainly whether its retailing formula could succeed in such a different market environment. The Toys “R” Us case shows how high barriers to entry can be overcome, at a cost, and how protected business easily become uncompetitive. The case also demonstrates how a new service format requires promotion that educates customers about its advantages. Toys “R” Us, Inc., a children’s clothing specialty retailer concentrating on toys and children’s clothing was headquartered in Paramus. New Jersey, In the early 1990s, after successful penetration of the North American market and selected European markets, company executives were formulating their expansion plans for the Japanese market.
COMPANY BACKGROUND
Toys “R” Us was, by early 1990, the largest toy retailer in the world, with about 20-25 percent of the U.S market, and 2 percent of total international sales. It was founded in the late 1940s by an American. Charles Lazarus, as the first “toy supermarket,” and was acquired in 1966 by department store chain operator Interstate, Inc. Interstate went bankrupt in 1974 after becoming overextended through buying a number of discount chains, but continued to build more Toys “R” Us stores through a court-ordered reorganization. After the reorganization was finished in 1977, Interstate divested all