Macy's, FAO Schwarz Team for More Toy Shops

Macy's plans to expand the presence of FAO Schwarz shops in its department stores, proving that not every development around gift giving in the holiday season has been related to price slashing.

Macy's decided to add the shops this fall after they enjoyed a successful test run at its State Street store in Chicago last holiday season. FAO Schwarz departments ranging in size from 1,000 to 3,500 square feet opened in 75 stores while shops in the 200 to 300 square foot range debuted at smaller stores. Over the next 18 months, Macy's plans to add about 400 more, mostly smaller FAO Schwarz shops for a total of about 675. Basically, said a company spokesman, all stores that have enough space available will get one of the new toy departments. Macy's thought about getting back into the toy business for several years, the spokesman said, but it didn't want to become another also ran, providing the same hot toys subject to the same deep discounts and, just like everyone else, getting undercut on price by Wal-Mart. It finally conceived of adapting the FAO Schwarz operation as a toy department. The resulting shops, Macy's decided, would make it stand out from its competition, so the department store approached the toy retailer and struck a deal.

Although it only has two of its own stores left after consolidating a few years ago, the location FAO Schwarz runs in New York is a toy landmark that is visited by customers from all over the world, especially during the holidays. The traditional toys FAO Schwarz develops for its stores, including giant stuffed animals, provide a special cachet. The 65,000 square foot Big Apple store does, however, include a selection of items from outside companies, many educational and some designed specifically for FAO Schwarz. The company also has a major boutique in Caesar's Palace in Las Vegas and an extensive web site. The Macy's deal will give it more visibility among consumers across the United States.

The Macy's selection includes a mix of private-label toys with "some of the best-sellers" from other sources that customers would find at the New York store, said FAO Schwarz CEO Ed Schmults.

The shops have been successful enough for FAO Schwarz and Macy's to meet in January about enhancements, Blackburn said. Otherwise, products available will remain largely the same year around, with a few seasonal items coming and going just to peak shopper curiosity.