Toys 'R' Useful: Stores Cash In On Educational Playthings

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The all-important holiday season is over for toy sellers, bringing to a close a tumultuous year for the specialty niche of educational toys.

With a demographic bump in the number of young children, and with many parents eager to spend on toys that will not only entertain but also teach, this could be a golden era for educational toys. Even industry leader Toys "R" Us has bolstered its approach to selling learning toys.

But several specialty retailers have learned that the big regional shopping mall is not the ideal place to sell such goods.

Store of Knowledge Inc., a Cerritos, Calif.-based chain of 70 educational toy stores, went out of business last March. Many of the stores had signed marketing agreements with local public-television stations and sold items related to educational shows such as "Sesame Street."

A similar chain, Learningsmith, which had also affiliated with public broadcasters, went out of business in late 1999. And mall retailer Natural Wonders Inc., which sold science and nature toys among other wares, closed down last spring.

"The regional malls are not the place where educational toy stores could thrive," said Kurt Barnard, the editor of Barnard's Retail Trend Report, an industry newsletter.

"There's not enough traffic in malls, and the rents are high. People go to big malls to buy a pair of slacks, not an educational toy," Mr. Barnard said.

But the troubles were not limited to stores in big malls. Zany Brainy Inc., an educational toy- store chain found mostly in suburban strip-shopping centers, filed for Chapter 11 bankruptcy protection in May. The 187-store chain, then based in King of Prussia, Pa., had acquired rival Noodle Kinoodle Inc. in 2000 but had trouble absorbing its 60 stores.

Zany Brainy gained new life in August when it was acquired out of bankruptcy by Right Start Inc., a Calabasas, Calif.-based children's clothing retailer. Then late last year, Right Start cemented its status as a titan of the toy world by acquiring major assets of the FAO Schwarz toy chain from Dutch company Vendex.

FAO Schwarz, famous from movies and for catering to upscale families, nonetheless has long been unprofitable. Right Start completed the acquisition last week, which includes the FAO Schwarz name, its flagship store in Manhattan, and 22 other stores.

"By bringing together FAO with the Right Start and Zany Brainy, we have established a real specialty- retailing powerhouse," Jerry R. Welch, the company's chief executive officer, said in a statement last week.

Lego and Leapfrog

Powerhouse, perhaps, but certainly not the No. 1 name in toy retailing, even in the educational toy niche. Toys "R" Us Inc., the Paramus, N.J.-based chain with more than 700 U.S. stores, has caught on to parents' interest in educational products.

In 1999, Toys "R" Us acquired Imaginarium, another mall-based educational toy chain that had struggled. The toy behemoth now has close to 50 free-standing Imaginarium stores and has opened educational toy boutiques under the specialty name in about 450 of its U.S. Toys "R" Us stores.

"Toys 'R' Us always had learning categories, but we pulled them all together under Imaginarium," said Julie Lynn, the vice president of merchandising and marketing for the division.

The Imaginarium at the Rockville, Md., Toys "R" Us is a 5,500-square-foot carpeted area within the 40,000-square-foot store. Among its offerings are products by Lego and Leapfrog, arts and crafts sets, and throwbacks such as Lincoln Logs and Tinker Toys.

"People are looking for something that will challenge their children," said store director Bill Owens.

As part of a larger redesign of Toys "R" Us stores, meant to make them easier to navigate and less like supermarkets, the Imaginarium site has play areas for children to try out toys, a feature that Zany Brainy outlets have long had.

Melissa Ronaldson, shopping with her 16-month-old son last week, had purchased a Mozart Music Cube recently and came back for more. "I'm looking for developmental toys," she said.

The Imaginarium strategy is one way Toys "R" Us hopes to differentiate itself from its prime competition, which is not other toy stores but discount chains such as Wal-Mart and Target. In fact, Wal-Mart topped Toys "R" Us in toy sales in 2000. The two companies have traded the toy king crown in recent years.

John Eyler, the president and chief executive officer of Toys "R" Us, told analysts in a conference call last week that all 700 U.S. stores and some 500 overseas ones will have Imaginarium boutiques by the end of this year, generating sales of some $400 million.

"We've seen tremendous growth and tremendous acceptance by our customers" for Imaginarium, he said. "It is designed to help them develop their children, and we think that is one of the last things that is going to be impacted by a difficult economy."

'Pots and Pans'

While educational toys might strike some as a positive alternative to violent toys and games, there are those who view the whole educational niche with caution. Alison Gopnik, a professor of psychology at the University of California, Berkeley, said that children learn from whatever toys are around them.

"Even if you don't buy any toys at all, children will explore with pots and pans, or rocks and dirt," said Ms. Gopnik, the author of The Scientist in the Crib: Minds, Brains, and How Children Learn.

"An electronic toy with lots of bells and whistles gets treated as the educational toy, while blocks, and toy trucks, and fairy-princess outfits are treated as toy toys," she said. "But from a developmental perspective, those are the real things that are teaching children.

"There is an increasing feeling among parents that there is this tremendous educational race on that starts as soon as their children are born," Ms. Gopnik added. "So it's a waste of time to them if their children are playing dress up when they could be learning their vocabulary. That is pernicious, and some people are really exploiting that to make money."

Funding for the Business page is provided in part by the Ford Foundation.

Vol. 21, Issue 18, Page 8

Published in Print: January 16, 2002, as Toys 'R' Useful: Stores Cash In On Educational Playthings
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