Toys R Us adds FAO Schwarz boutiques to stores, but no $1,500 teddy bears

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toys-r-us-to-add-fao-schwarz-boutiques--but-no-1500-teddy-bearsToys R Us will try to leverage its ownership of FAO Schwarz this holiday by giving shoppers coast-to-coast a taste of the fancy Fifth Avenue toy store, and use the brand to build foot traffic at its big-box stores.

The company announced it will open FAO Schwarz boutiques in 585 Toys R Us stores nationwide and relaunch the FAO Schwarz website, FAO.com. The in-store boutiques, which will open Nov. 1, will be in the fronts of stores, and feature replicas of the giant toy soldiers that guard the entrance to the flagship FAO Schwarz store in New York City. They will carry a smaller selection of toys in a lower price range than the flagship, $2.99 to $64.99, but to continue the branding, they will offer miniature replicas of the giant piano Tom Hanks played in the movie Big.
Gerald Storch, CEO of the privately-held toy chain, told The New York Times that the boutiques will make FAO Schwarz accessible to customers all over the country. But the move will also benefit his company in a holiday season in which the only bare-knuckle fight in the toy aisles is likely to be between retailers trying to undercut each other on price, not parents fighting for hot toys.

Ironically, the boutiques give Toys R Us a chance to succeed at something FAO Schwarz failed in repeatedly when it was an independent company. The 595 in-store boutiques will be more than 500 more stores than FAO opened in its several attempts to expand nationwide -- which twice put the company in bankruptcy before Toys R Us bought it in May. It now has two stores, in New York and Las Vegas.

Toys R Us also announced it will continue to operate the FAO Schwarz holiday catalog, which this year will be delivered Nov. 10. The catalog has toys at all price ranges, but it's known for its selection of premium toys. Among the offerings this year is a Steiff Karl Lagerfeld teddy bear dressed in designer jeans, italian wool jacked and silk tie for $1,499.99.

There are probably few people who would give an infant a $1,500 plush toy to drool on, but like the Neiman Marcus holiday catalog, practicality is not the point -- it's about protecting the brand.

FAO Schwarz has an image of exclusivity and a reputation as the place that carries the toys no one else has. In a holiday season when stores are tripping over each other to offer the lowest price on the same stuff everyone else has, those FAO Schwarz departments may turn out to be the most profitable corners of the Toys R Us stores.

Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT) are already staking out the $10 toy territory with thousands of items that will most likely be loss-leaders. By adding services like layaway for big-ticket items and trade-ins for video games, Toys R Us is taking its fight to another front. It may not sell many Italian designer teddy bears, but as Storch said, it could set itself apart as the go-to store for toys.
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