Babies 'R' top priority at busy superstores

NEW YORK -- Tamiko Simmons walked down the aisles at the Babies "R" Us store, checking items off her list: crib, stroller, bouncer chair, car seat, bathtub, feeding pillow, sippy cups, mobile, blankets, toys and of course, diapers.

Expecting her second child, Simmons was buying everything new again. But shopping is much easier now than when she had a baby 10 years ago.

Back then, "I had to go to many different stores," she said. In the meantime, Toys "R" Us created Babies "R" Us, its one-stop shop for baby products, where she could get it all, and where the nation's No. 2 toy retailer has found a very comfortable and lucrative niche.

With 188 stores nationwide, Babies "R" Us has emerged as the biggest money-maker for Toys "R" Us, which is contending with increased competition in the toy market from large discount chains like Wal-Mart.

Based in Paramus, N.J., Toys "R" Us reported a net loss of $7 million and a 1.5 percent decrease in same-store sales for the quarter ended May 3. By contrast, Babies "R" Us, launched in 1996, reported a 16 percent increase in operating earnings to $57 million, a 10.4 percent increase in total sales and a 1.3 percent increase in comparable store sales despite the tough retail environment.

Fifty Babies "R" Us stores have opened in the last 30 months, and 20 more are scheduled to open this year. Another 25 are being renovated to be more spacious.

"We know that we have our guest with us for a very short time," said Elliott Wahle, president of Babies "R" Us, referring to the store's customers. "Typically it is at the pre-natal stage and until the child is about a year old. So we try to make the store relevant for her and try to help her make the transition to a Toys 'R' Us guest."

Of course, happy customers will return when they have another child, as did Padmaja Sai, whose first child, Janvi, is 3 and whose second, Ashna, is due in a few weeks.

"I am using the same crib because it cost so much, but for smaller items like a bath tub, the blankets and the washcloths, I decided to buy everything new," Sai said. "It's psychological. I can't use three- year-old stuff for a new baby."

Michael O' Sullivan, vice president at consulting firm Bain & Co., said creating Babies "R" Us proved to be a smart move.

"Ten years ago, there were regional players, specialty stores and mom-and-pop stores where you could shop for babies," he said. They didn't have the power to offer lower prices that a large national chain can, he said.

"Now, the Babies 'R' Us brand is becoming stronger, and over time it will strengthen its position," he said.

Some competition is emerging, but it is not on the scale yet of Babies "R" Us. For example, Buy Buy Baby, a privately held company launched in 1996, has seven retail stores in three states, New York, New Jersey and Maryland.

"We plan to expand at the rate of one store per year," said Jeffrey Feinstein, owner and founder of Buy Buy Baby. "We don't want the rapid expansion route. We want to groom the people who work at our stores, and if we expanded fast, we couldn't do that."

Feinstein recognizes that people are looking to spend more on their children and want an array of products under one roof.

"The bigger stores are responsible for having more dollars spent per child. We want to see the extras being bought at our stores," Feinstein said. "We're not really competing with anyone. We are just creating a nicer shopping experience with a cleaner look, better product mix, better service. The middle to upper income mom is our core customer base."

With the average age of mothers rising and 42 percent of households now dual-income, spending on babies has gone up. And new mothers want the convenience of big retail chains, said Wendy Liebmann, president of WSL Strategic Retail, a marketing and retail consulting firm.

"That's why there is so much activity in big box retail and an expansion in chain stores like Babies 'R' Us," she said.

Meanwhile, Babies "R" Us is expanding its offerings to include services such as photo studios in 40 stores. The stores offer baby care seminars and classes, free car seat installation inspections and online services. They also have a gift registry -- to lure not just new or expectant parents, but their friends and relatives as well.

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