International is in a league of its own - International

DSN Retailing Today,  Oct, 2003  by Tim Craig

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"jouet." "omocha." "wan ju." "leksak." There's no end to the ways you can translate the word toy across the globe. But it's becoming increasingly clear in most of the developed world that the first definition for "mega toy store" is now Toys "R" Us.

The reason for this global recognition is clear. In just two short decades, the International business of Toys "R" Us has evolved from a fledgling offshoot to one of the company's fastest-growing divisions. With a current base of more than 550 stores, including company-owned and franchised locations, the division has grown exactly 50% in the last five years and now operates stores in 29 foreign countries on 5 continents.

For those keeping score at home, that makes Toys "R" Us one of a very small, very elite group of truly global institutions. In fact, among the remaining ton 25 U.S.-based mass retailers, no one operates in as many international markets--not Best Buy, not Staples, not even Wal-Mart.

"I think if you step back and you look at the strength of our brand around the world, we are way up there," said John Barbour, president of Toys "R" Us International. "There are some people in France that have done pretty well in Europe ... but have failed in the States. But sit back and ask yourself, 'How many retail models have been very successful in Europe, The Middle East, Africa, The Americas and Asia?'"

The answer, of course, is very few. Barbour himself suggests that perhaps only Gap Inc. is as readily recognized in all corners of the globe. And the reason, he says, is fairly elementary.

"Many of our competitors have failed [internationally] because they've been too tied into their cookie-cutter approach. And that's a very insular way to try to build your business."

To avoid that mold, Toys "R" Us International has managed to stay ahead of the curve by employing some of the same business practices that are now the hot buzz words of many of its domestic competitors--such as micro-merchandising, trend spotting and the sharing of best practices. In fact, according to Barbour, such practices are the key to the company's ability to gain a leadership position in the markets in which it operates.

"I have a whole team of people who spend their life on airplanes flying around the world looking at what's happening ... and making sure that those best practices and new ways of doing things happen [everywhere Toys "R" Us operates] right across the world," said Barbour, who credits Toys "R" Us for having identified many hot trends abroad, such as Pokeman and the Razor scooter, and being the "market maker" for that product at home. "We have an incredible intelligence base to find out what's happening where. And that's fundamentally important when it comes to being on trend and being ahead in the marketplace."

Just how far Barbour and Toys "R" Us can take its international business is unclear. On the one hand, Barbour said he sees room for a greater international presence. "In many of our marketplaces, we still have significant opportunities to open new fresh stores," he says. On the other hand, he foresees limited expansion (20 to 25 stores, including licensed franchised stores) as part of a deliberate company effort to avoid overextending itself.

"I'm a big believer in the fact that you can grow too quickly, and one of the things we're trying to do is take steps to grow the business, but then at the same time consolidate what we've got," he said. "The real focus here in my team and across the business is sustainable long-term growth."

Presumably, that means maintaining the international division's role as one of the corporation's fastest-growing components. Which begs the question: Could Toys "R" Us International, whose growth rate is head and shoulders above most other divisions, one day equal or even eclipse the revenues of the company's slower-growing domestic toy store business?

"I certainly haven't sat down and created a plan to say when we are going to be as big or bigger than the U.S. [division]," Barbour said. "It's going in that direction, but we still have a significant way to go because ... the U.S. is still the biggest consumer marketplace in the world. And nobody really knows what's going to happen with the U.S. economy over the next few years."

STORES       544 *

NET SALES    $2,163 mil.

OP. INCOME   $160 mil.

Source: Company Reports
Note: All figures as of Feb. 1, 2003

* Includes leased and franchised stores

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