Toys"R"Us Goes After Dollar Stores

(MoneyWatch)  In a move attempting to draw in a price-conscious consumer during the recession, Toys"R"Us has launched a section in its stores called $1-$2-$3 Fun! that sells toys for no more than $3. Hey, this economy is boosting sales at deep-discount retailers like Dollar General, so why not take a page out of their book?

The sections, now being rolled out at the 512 Toys locations nationwide, are in the front of stores. The 100 items offered are broken up into five sections: dinosaurs; "fun toys" such as tic-tac-toe, puzzles, foam darts and a wind-up fishing game; dress-up accessories for princesses; musical instruments; and art tools.

The move appears to be in line with the Wayne, N.J.-based company's strategy of becoming a one-stop shopping venue for all things toys. Now it is going after the dollar stores.

In a move to compete with large-format retailers like Wal-Mart, last year the retailer launched "R," a 70,000-square-foot superstore (most of its units are 40,000 square feet) that combines Toys with its popular 262-location Babies"R"Us format. There are 19 "R" stores currently operating, as well as 53 units that have Toys and Babies stores located side by side.

So far Toys"R"Us has weathered the recession relatively well. During the all-important holiday season, sales at stores open at least only dropped 3.4 percent, while in December they rose 1.9 percent.

Time will tell how long the chain can hold out against the Wal-Marts of the world. But now that main competitor KB Toys is gone, maybe it can end up in a position similar to Best Buy, whose rival Circuit City no longer exists.

The company notes its tough competition in its recently released annual report, and management seems confident that it can succeed against the challenges. "We believe we are able to compete by providing a broader range of merchandise, maintaining in-stock positions, as well as convenient locations, superior customer service and competitive pricing."