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Toy Makers Take On Wal-Mart

NEW YORK - In what could be a 2004 version of "Toy Story," a group of toy manufacturers have decided to take a stand against Wal-Mart Stores by delivering fewer hot toys to the chain and having more exclusive launches at competitors, like Toys "R" Us, according to the Associated Press.

The move has implications for the supermarket industry because it is one of the few times when manufacturers have challenged Wal-Mart and its business approach.

Wild Planet Toys' Aquapets, an interactive critter, will be at Toys "R" Us exclusively for three months this spring before it reaches the mass merchants, because the company believes the success of Toys "R" Us is important for the health of the toy industry, according to the report. Industry sales have been lackluster in recent years as discounters cut into profit margins. Also, kids have been "growing up" quicker, switching from toys to video games for entertainment.

Price wars instituted by Wal-Mart, which used toys as a loss leader to lure in holiday shoppers, were blamed for the recent bankruptcy filings by FAO Inc., owner of FAO Schwarz; and KB Toys Inc., which plans to close nearly a third of its mall-based stores.

Manufacturers express concerns that Wal-Mart's deep discounting makes toys unprofitable for other retailers, who are likely to order fewer products. Its strategy may force more traditional toy stores, which carry a vastly greater assortment, to close. Plus, toys may become a devalued product -- permanently lowering margins and making toys that are never discounted seem far more expensive to shoppers.
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