Toys “R” Us adding a convenience store-within-a-store

The “R” market concept makes some sense but at the same time is unlikely to drive big incremental sales to Toys “R” Us. It is potentially a way to reallocate square footage and make the overall store more productive. The product can be expected to drive some higher sales to the customer’s “shopping cart,” and it helps smooth out the seasonal peaks and valleys of the toy business. But the drawback is that consumers are unlikely to switch their loyalty from Walmart or other destination stores for household products, even kid-focused categories like diapers. Toys “R” Us needs to be very price-competitive to be meaningful in these businesses, which may not be a margin win for them even if the strategy drives incremental sales.

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