Temporary Stores at Toys R Us

Toys R Us has announced that it will be opening a series of temporary stores specifically for the upcoming holiday season. 80 of the temporary stores will be pop-ups located within shopping malls. More than 200 additional locations will be temporary "store-within-a-store" toy sections located in their Babies R Us locations. The move is quite interesting, because it clearly seeks to grab market share in this down economy, particularly given the demise of several other toy retailers (including KB Toy, which operated in malls primarily). As this article mentions, it also sets up a clear battle between Toys R Us and Sears, who will be a key competitor within the shopping malls.

For me, this move raises some interesting questions regarding the break-even analysis behind this strategy, and reminds us of the importance of considering opportunity costs in any such analysis. How much revenue must these generate to offset the costs? Remember that the "store-within-a-store" outlets within the Babies R Us stores are not "free" by any means. Opportunity cost must be considered. By taking floor space away from baby products, the company is foregoing potential baby product sales. That represents a key opportunity cost of this strategy. More generally, making this concept work hinges on Toys R Us' ability to keep the fixed costs of this initiative as low as possible, particularly with regard to set-up and tear-down. Clearly, the toy market has undergone much consolidation in past years, and the battle for market share has been intense. Look for more interesting battles with this latest creative initiative by Toys R Us.