Toys R Us in Japan

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Harvard Business School 9-796-077 Rev. February 25, 1999 Toys "R" Us Japan I do not believe the Japanese have chosen freely to have these limitations. All we would have to do is open a large retail store where prices were 40% less and choices were very broad. If the Japanese consumer didn 't like products offered in that fashion, then the store would not be a success. . . . —Carla Hills, United States Trade Representative, February 1990 In early 1991, Toys “R” Us seemed poised on the brink of a high profile entry into the world’s second largest toy market. A “category killer” that enjoyed phenomenal success in the United States and Europe, Toys “R” Us had tried for several years to crack the lucrative but forbidding…show more content…
Toys, he therefore decided, created a far superior business opportunity. After studying the U.S. discounter Korvettes, Lazarus decided to experiment with a self-service, supermarket-style format. In his new Children’s Supermarket, he vowed to undercut competition and have a bigger, better selection than any single toy store. Discounting had arrived in the toy business. Children’s Supermarket quickly grew into a thriving chain of four stores, renamed Toys “R” Us after Lazarus decided he needed better signs with “shorter words, bigger letters.”4 He sold the chain to Interstate Stores in 1966 for $7.5 million, retaining a seat on the company’s Board. When Interstate folded in 1978, Lazarus rescued his company, determined to build it into a nationwide chain. Over the next decade, Toys “R” Us sales compounded by 26% per year, with sales productivity per square foot double that of the retailer’s nearest competitor. 5 By 1988, Toys “R” Us had captured 20% of the U.S. toy market, with sales surpassing the $4 billion mark.6 Sourcing directly from manufacturers, the chain used its huge buying clout to offer goods at 10-20% discounts compared to smaller toy retailers. Year-round advertising campaigns encouraged consumers to buy toys at any time, instead of just at Christmas. A typical Toys “R” Us store brought together 8-15,000 SKUs (stockkeeping units) of toys and

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