The company was in a difficult position during the previous year, losing significantly to discounter Target or to Wal-Mart and it even had to announce that it may leave the toy industry if things are not likely to improve during the next period of time. In order to "thin inventory," the company came up with heavy discount policies and gift cards to increase the volume of sales. According to Dhruv Grewal, professor of marketing and retail at Babson College, "it's time for Toys R Us to think outside the box." But analysts say that Toys R Us may need more ideas, such as unique gift card options and co-op branding with other retailers to survive

Another type of policy used by toy retailers is to expand the categories so that people buy at one time, including books, music, video games and DVDs (as an advantageous package). This type of policy will allow the client to benefit from a combo product and, from the part of the retailers, to increase their scale economies and revenues through these combined packages. The psychological effect of a combo category is great in ensuring that the client will not necessarily purchase only what he cam to purchase, but to induce the idea that product a works great with product B. And C.

In terms of challenges, we can state that some of the main challenges in the toy industry are related to the fact that no toy has yet emerged as a "must have." In this sense, "no toy has emerged as a "must have" to boost the $20 billion industry, raising the spectre of another holiday season...

If so, it would mark the industry's fourth consecutive year of poor performance."
Additionally, the sales are estimated to "go down 2% to 4% for the year at about $19.4 billion compared with $19.8 billion last year," says Anthony Gikas, retail analyst at Piper Jaffray

Another challenge can be considered the consumer behaviour concerning the economy of "every penny" with all the price reduction, gift card and other promotional and reducing strategies. The sale strategy at the main toy stores is to be directed to match the profile of the consumer.

As in the above examples, the reducing and promotion strategies are diversified and have positive aspects and negative ones too for the market leader, but also for other retailers. I think it was both a good and a bad thing for WMT to use "lost leader pricing." On a short-term it was an advantage as WMT won the first position the market, but on a long-term it can be a disadvantage as the future price reduction cannot be so high as it wouldn't be a rentable policy for the company, therefore other toy retail companies are approaching WMT and also because the benefits can begin to go down.

Bibliography

Wal-Mart doesn't plan to toy much with prices" http://www.usatoday.com/money/industries/retail/2004-10-11-toy-2004_x.htm

Grant, Lorrie. Wal-Mart doesn't plan to toy much with prices. On the Internet at www.usatoday.com/money/industries/retail/2004-10-11-toy-2004_x.htm.Last retrieved October 20