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Expert: Toys, Babies R Us store combinations part of shifting retail strategy

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Wayne-based Toys R Us Inc.'s new strategy to house both its Toys R Us and Babies R Us brands under a single roof puts the company at the front of an emerging shift in retail toward maximizing inventory space and avoiding an overlap of products, a consumer trend expert said.

"In Huntington (Station, N.Y.), Toys R Us and Babies R Us are right next to each other. That means two different store managers and different register lanes and a bunch of extra square footage devoted to similar products," said Al Ferrara, national director of retail and consumer product practice for BDO USA LLP. "With the Internet and wholesalers taking volume and sales away from these retailers, you don't see too much growth in retail store space lately. Toys R Us' strategy is a subtle way of cutting costs and managing less square footage without reducing inventory levels."

According to a spokeswoman, Toys R Us first launched its side-by-side store model in 2006, and by November, the company will have added eight integrated stores and transform 13 existing locations into the consolidated model — including its stores in Cherry Hill, Rockaway Township and Union.

"If you've got two stores side by side with 10 (employees) in one and 10 in the other, it's better for your overhead and payroll costs to merge your merchandise under one roof and maintain it with 16 to 17 people, as opposed to 20," Ferrara said. "Customers now don't like to walk in and out of separate stores, so putting two or three concepts under one roof is, in the long term, to your advantage."

While recent analyses of consumer trends show shoppers are growing tired of big-box formats, Ferrara said Toys R Us "would never be able to survive with 5,000-square-foot boutique stores with the size of their offerings," which prevents the company from maintaining integrated stores in less than 30,000 square feet of space.

But unlike other big-box retailers struggling in sales as a result of providing few customer service representatives in large amounts of space, Ferrara said Toys R Us' size structure will not decrease its consumer traffic, since adding more inventory under the new side-by-side model "makes the space tighter and improves the service."

"I don't think Toys R Us' are so significantly large that they're turning off customers, because they're becoming one-stop shops with this strategy," Ferrara said. "As long as they've got the quality products and give customers a good experience, no matter how big or small the store is, the customers will come back."

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