In the highly competitive business of toy retailing, where discount prices and special promotions are part of the gamesmanship, New York's F.A.O. Schwarz prospers by clinging to merchandising methods as staid as those of nearby Tiffany's. Century-old Schwarz has never had a sale in its famed Fifth Avenue store, where two spacious floors are packed with 12,000 toys, and prices range from 15¢ for a whistle to $2,000 for a furnished, four-room puppet theater. The store has refused to hire a costumed Santa at Christmas ever since Founder Frederick Schwarz ruled that "no one is good enough to play Santa Claus." The clerking staff is dominated by grandmotherly types who do not press their wares.
Yet Schwarz has built its sales from a Depression low of $675,000 to $5,500,000 last year, now boasts seven branches.* Name customers have been commonplace ever since Thomas Edison strolled in to shop for a doll and lingered in fascination over a Schwarz jack-in-the-box. Caroline Kennedy's toy list for her first Christmas at the White House was filled at Schwarz. "Why are we successful?" asks Schwarz President Charles Veysey, 45, and offers an answer that doesn't explain: "F.A.O. Schwarz is a retailing phenomenon." Another Schwarz executive provides a clue: "Grandparents are very indulgent."
To the Carriage Trade. Arriving in the U.S. from his native Germany in 1856, Frederick August Otto Schwarz went to work for a Baltimore stationery importer. German exporters at that time sometimes packed toys in with their stationery in the hope of expanding their export lines. Schwarz put the toys in the window, and soon they were outselling stationery. By 1862 Schwarz had switched to selling nothing but toys; in 1870 he moved his business to Manhattan, where he quickly gained a reputation for "exclusive" imports that won him the favor of the carriage trade.
Though the business is still wholly owned by the Schwarz family, no Schwarz has been active in its management since 1931. President Veysey, a trim, pipe-smoking Canadian, who learned retailing with New York's B. Altman & Co., carefully maintains the Schwarz tradition. He spends much of his time on the floor chatting with customers, continues to seek out the kind of exclusive toys that built the business. By offering premiums to toymakers, Schwarz gets them to add individualized touches to its toys—a redesigned box or an extra pair of shoes for a doll. The extras, plus a reputation for quality and service, bring Schwarz a premium too.
Special World. Schwarz's agents search for toys from France to India, and 25% of the store's toys are imports. A fulltime staff of Schwarz toymakers turns out specially built toys that include such childish delights as "a city-mouse house" and a cousinly "country-mouse house." Two weeks ago, celebrating its 100th birthday, Schwarz put on sale $50,000 worth of antique toys, including a 75-year-old Jonah and the Whale bank ($100) and a 100-piece German miniature kitchen ($1,000). By the end of last week, $10,000 worth had already been sold.