University of Ulster, Coleraine

Distribution Strategy
The distribution strategy is simply the method by which an organisations product reaches the market. Distribution strategy decisions are about which distribution channels should be used for the product (Blythe, 2008) Toys R Us use two methods of distribution to get their products to the target market, these include: 1. Direct Selling where the customer visits the store, interaction takes place between the buyer and seller and the product is purchased. 2. Online Selling Products purchased online are delivered to the customers home address. Toys R Us outsource their deliveries, therefore a third party company delivers the product to the consumer. Toys R Us play an important link in the indirect distribution strategy used by manufacturers, as they carry out the Retailer function (Figure 5) (Figure 5) Indirect Distribution strategy

Performance and Success

As the market leader the company must continually assess and review their performance against key performance measures. This allows them to maintain their position as market leader and helps them to set strategic aims and objectives. As this is a continuous process they can adapt quickly to any change in the market. The key performance measures that Toys R Us have used are: Increasing sales turnover Since 1995 the companys sales have been steadily increasing. This is illustrated in Figure 6. This is done on a store-by-store basis as each store competes to better their sales.

Figure 6 Toys R Us Company Sales

Jul Jun 1995/ 96 Sales ( 000) Number of outlets 290,56 5 51

1996/ 97 315,64 3 57

1997/ 98 363,62 7 61

1998/ 99 371,10 4 62

1999/ 00 390,03 6 64

2000/ 01 430,62 2 63

2001/ 02 488,30 4 64

2002/03 535,796 64

2003/04 496,676 64

2004/05 502,030 67

2005/06 508,826 65

2006/07 525,610 71

2007/08 566,553 73

(FAME, 2008) Size Through offering the largest number of specific toy specialist outlets, growing year on year (Figure 6). Service By offering skilled employees that have an extensive knowledge of their products, for example, in the bikes
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department staff are trained to offer detailed safety information.

Evaluation
Having evaluated the competitive strategies, in relation to market leaders, the following recommendations have been formed: From the evidence shown in the industry analysis it is apparent that the Toys and Games Industry has been growing since 2003. This growth is expected to continue, despite the effect that current UK economic conditions may have on market growth. Due to the expected market decline, it is suggested that the company adapt their strategy to incorporate the promotion of their own branded products, giving the consumer a cheaper alternative. This could be carried out through the use of an advertising campaign focusing on this range and the benefits it provides for the consumer. Although this economic slowdown is generally seen as a threat, being a well-established company with a firm base they can use this slowdown to their advantage by devising a long-term growth strategy. This can be done through: Land banking as land is currently cheaper due to poor market conditions Competitor buy-outs Small companies are at more risk of failure in the current economic climate. Buying property Due to the lack of available credit, property prices have decreased.

As this report has shown, the promotion strategy is not a key element in the companies marketing mix. The company could look to increase their sales throughout the year, focusing on the period immediately after Christmas when sales often slump. This can be done through January promotions and sales that increase the number of customers into their stores. Based upon the successful business model used by catalogue stores, we recommend that Toys R Us introduce a catalogue that allows orders to be made via telephone or online. This will improve the exposure of the brand name and product range to the wider market as catalogues are distributed throughout homes in the UK.

As shown in the PESTEL analysis, there has been an increasing pressure on companies to improve their environmental policies. It is recommended that the company look to adhere to this readily and use it to benefit their brand image. To do this they should promote and publicise the steps they are taking to help the environment. The company can take simple steps such as; reducing packaging, using recycled plastic bags and using renewable energy sources. To promote these activities the company should use local and national media along with providing environmental information on their website. The PESTEL analysis has also highlighted that there has been a change in healthy living attitudes with consumers wishing to live healthier lifestyles. It is suggested that the company increase promotion of their of active/outdoor goods. This can be carried out through an advertising focus on this range.

Appendices

Appendix 1 Real GDP Growth (%)

Appendix 2 The UK market for Traditional Toys & Games by Product Sector by Product Value (m at rsp and %), 2007.

Appendix 3 - Relative sales figures and profit margins of toy retailers.

FAME (2008)

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