A toy price war that could bring good tidings to holiday shoppers is on the verge of erupting, after the nation's second-largest toy retailer said it would beat its competitors' advertised prices until Christmas.
But while buyers of everything from Barbie to Nintendo could be the big winners in this recession-plagued season of bargain buying, industry experts are fingering Child World itself as the big loser. The reason is that the expected toy war pits troubled Child World against Toys R Us, the industry leader.
Child World has begun to drastically undercut all of its competitors' advertised prices in newspapers and catalogs through the holiday season. The Avon, Mass.-based chain, prompted by long-term sales losses, said last week that it would cut 10 percent off its competitors' advertised prices.
If Toys R Us, for example, were to advertise Sega's new Super Nintendo entertainment system for $199.99, Child World would sell it for $180. Popular Teen-age Mutant Ninja Turtles action figures, which list for $3.99 each at Toys R Us, would sell at Child World for $3.59 if they were advertised by the competition.
Ronald E. Tuchman, Child World president, said his company is trying attract the customers it has lost to competitors. He said that both Child World and Toys R Us, the world's largest toy retailer, can gain market share without hurting the other's business by squeezing out retailers that do not specialize in toy sales.
"There is a soft underbelly of toy retailers out there that are not focused in the toy industry," Tuchman said. "We can increase market share by aggressively pursuing customers we have lost over the years. We can get our customers back, maybe not today or tomorrow, but eventually."
Last holiday season, Child World offered massive discounting to boost sales to cover its financial woes, pressuring Toys R Us and other toy retailers to cut their prices, which lowered profit margins for toy sellers.
This year, Child World is reacting to slow sales and profit margins eroded by intense price competition, said analysts, who are calling the move the start of a pre-holiday price war against Toys R Us.
They said, however, that Child World's attempt to attract customers from its competitors is a dicey move for the troubled company, because Toys R Us, which is suffering its own financial difficulties, is a more powerful toy retailer with a deeper financial reserve.
"This is a desperate move by a troubled company," Terrence McEvoy, an analyst at Janney, Montgomery Scott Inc., said of Child World. "I'm surprised that Child World would try to battle Toys R Us, because they know that Toys R Us is going to come back strongly and will be the winner. Toys R Us dominates the industry, and, if this turns out to be a real nasty price war, this will widen their lead."
With 17.9 percent of the U.S. toy market, Toys R Us, in fact, has more than twice the market share held by its closest competitor, Wal-Mart Stores Inc., with 8.3 percent. K mart is No. 3, with a 7.7 percent market share.
Although it is the second-biggest pure toy chain, Child World is only a distant No. 4 in market share, with 4.7 percent of the U.S. toy market.