BUSINESS: THE ANTI-WAL-MARTS
The toy business is a cruel place these days. The latest reminder came last week, when Toys "R" Us announced plans to split its company in half--and possibly get out of the toy business altogether. The toy seller's move makes it the latest company to be squeezed out by Wal-Mart--both KB Toys and FAO Schwartz have filed for bankruptcy since the chain began deeply discounting toys a few years ago.
Although this storyline feels familiar--another business crushed by Sam Walton's empire--it doesn't tell the whole tale. "In almost every category in which Wal-Mart competes, there's at least one competitor that has figured out how to hold their own," says Bain & Co. consultant Darrell Rigby. They're finding ways to justify higher prices, most often by offering unique products or better service. Upscale grocery chains like Trader Joe's are growing; specialty retailers are stealing sales from Wal-Mart in the hair-care and cosmetics categories, and in home electronics Best Buy is thriving by giving extra attention to customers bewildered by all the new home theaters and computer gear available.
Even some toy retailers are finding ways to play defense. Joseph Diaz, president of Learning Express, says customers remain loyal to his chain's 107 stores because of their upmarket offerings like elaborate building sets, crafts and $180 tricycles--things they can't get at Wal-Mart. All of its stores offer free gift-wrapping; at some locations, busy moms phone in orders and staffers deliver wrapped gifts to their cars. "You can't compete with Wal-Mart on price," says Tim Hayes, a Learning Express store owner, "but what I do better is starting to pay off." With the holiday shopping season just a few months away, his optimism will soon be tested.
