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Some relief could come with strong sales this fall. Generally, the fourth quarter, which includes Halloween and Christmas, accounts for half of all toy sales. But like the recording and movie industries, the toy trade is driven by hits. So far this year, "there isn't a superhit toy out there," says Eugene Gilligan, executive editor of the toy-industry trade publication Playthings. "The biggest hit for the past year has been Beanie Babies, and Toys 'R' Us doesn't even carry them." But retailers have high hopes for several potential breakout toys, from a microchip-loaded version of venerable Legos building sets to computer games such as Nintendo's Pokemon that even Alex, jaded at age 11, might like.
Even if several new toys catch fire in the shopping season that is just starting, Toys "R" Us will have to fight harder than ever for its slice of the profit. Wal-Mart's share of the $35 billion toy-retailing industry has grown from 10% in 1990 to 16% this year; over the same period Target's share has more than doubled, to 7%. The discount stores use toys as "traffic builders," attracting families with low prices on popular toys and then making higher profits on such items as clothing and appliances. "Wal-Mart and Target carry only the 50 or 100 hottest toys," says David Miller, president of the Toy Manufacturers of America. "Toys are only a fraction of their business, so they can use them as loss leaders."
Meanwhile, parents seeking upscale educational toys these days can find them at newcomers Noodle Kidoodle and Imaginarium. Little wonder that Toys "R" Us' market share has declined to 20%. The competition is so brutal these days that the company's chief executive, Robert Nakasone, told TIME in an interview at his Paramus, N.J., offices that "when you earn a dollar, it's got someone else's blood on it."
Toys "R" Us has also hurt itself over the past year, analysts say, with neck-snapping shifts in strategy and laggard execution of the blocking and tackling aspects of retailing, such as controlling inventory and providing polite and knowledgeable service. An assistant manager at a New Jersey Toys "R" Us outlet led a visitor through a cavernous storage room piled floor to ceiling with everything from Micro Machines to mattresses. The store's inventory, she said, often surpasses $1 million. Multiply that by the 1,462 Toys "R" Us stores, and you see the scope of the problem.
At other Toys "R" Us stores, while many customers praise the selection of games and toys, several complain about service and, surprisingly, prices. Third-grader Kirby Turnage IV, shopping in Pensacola, Fla., says that "my brother and sisters like Toys 'R' Us better, but I keep telling them Target is better. The prices are better." His father, Kirby Turnage III, observes that the Toys "R" Us lines are too long and that there is a "lack of customer service." And Denver Toys "R" Us shopper Tonya Howard says, "The people here have an attitude."