Toys "r" Us in Japan

I. Overview

Toys "R" Us is an international success selling toys across the world. In 1991, the 97 stores they had opened outside of the United States brought in 14% of the chain's total sales. Bolstered by their success, Toys "R" Us looked to enter the notoriously hard to crack Japanese market. Toys "R" Us partnered with Den Fujita, a very influential business man in Japan, and proceeded to get the necessary approval's to open a chain of stores in Japan.

Toys "R" Us was founded by Charles Lazarus in 1957. Lazarus originally sold baby furniture to families during the post was baby boom. He quickly realized that baby furniture did not wear out quickly, so repeat business was very rare. However, toys were often requested and so Lazarus decided that selling toys would be more lucrative. He opened a self-service, supermarket-style formatted toy store. Naming this new toy store the Children's Supermarket, Lazarus started the first large-scale discount toy store.

After changing the name to Toys "R" Us Lazarus expanded the chain across the United States. Stores were almost exact replicas of one another and made new store construction easier. A central network controls inventory for all stores and toys are automatically replaced when supplies fall below a pre-determined level. According to Lazarus, "no decisions were made in the field" and this was the key to their success.

Toys "R" Us went global in 1984, opening its first international store in Canada. Customers in other countries flocked to Toys "R" Us because of their wide selection of toys and discounted prices. This made local toy storeowners unhappy because giant discount stores were driving them out of business. In several countries and in Germany especially, many manufacturers refused to sell to Toys "R" Us in fear of damaging their relationship with the smaller retailers. In 1991, Toys "R" Us set it's sights on Japan.

Japan seemed ripe for a toy discounter at the time. Retail sales had increased by 94% during the 80's. The children of Japan were strong beneficiaries of this boom. Because Japanese parents pushed their offspring hard to excel at school, the parents tended to balance this with overbuying toys and clothes for their children. Also, Japan's falling birthrates allowed parents and grandparents to put less money towards food and more on toys, making Japan the second largest market for toys. Toys "R" Us did not want to miss out on this emerging market.

II. Key Issues

* In Japan, 75% of retail spending takes place in small stores

* Multilevel of wholesalers make direct buying of merchandise difficult

* Keinetsu stores make