Generation Tablet
Gerelyn is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I was recently introduced to the next generation's answer to the Etch A Sketch. It's called a Boogie Board, which - made by Improv Electronics - is a pretty cool name for a drawing device in any event. But it's also a bit more sophisticated than an Etch A Sketch as it has a drawing pen, a single magic button that erases previous doodles and is thin enough to fit neatly in the side compartment of any car. Boogie Board has all the makings of the simplest kid-sized electronic tablet - but it's now sure to get a run for its money.
Privately held Toys R Us has taken a swipe at online retailers by introducing its answer to the tablet wars with its own exclusive offering - Tabeo, according to The Wall Street Journal. Tabeo, which will only be available at Toys R Us retailers, will sell for about $150, presumably in time for the holidays. Tabeo is more sophisticated than Boogie Board, and Etch A Sketch for that matter, in that it can access the Internet and it does so via Google's Android browser. It's Toys R Us' way of hitting back at online rivals such Amazon.com and discount big-box retailers including Wal-Mart Stores (NYSE: WMT) and Target that have injured the toy store with their competitive pricing advantage.
This was supposed to be Toys R Us' year as expectations of a long awaited return to the public markets hovered. Surely owners KKR, Bain Capital and Vornado Real Estate Trust have some exit strategy in mind despite setbacks for an IPO that was scheduled as early as 2010. And while last year's holiday season proved to be a disappointment to Toys R Us amid sluggish sales and competitive layaway plans offered by retail rivals, this year isn't over yet.
Indeed, the toys retailer came out swinging in preparation of this year's upcoming holiday season. Last week, Toys R Us revealed changes to its layaway program that temporarily eliminate minimum purchase requirements and service fees. In response, Kmart, which is owned by Sears (NASDAQ: SHLD), placed a moratorium on layaway fees until at least mid-November.
Sears' shares have come under pressure since March highs of about $83 amid some North American store closings. The most recent upticks in August retail sales and consumer prices, however, might help the stock regain that ground. Wal-Mart, whose shares are already trading at 52-week high levels, is also bolstering its layaway program, wrapping more of its items under its eligibility universe and lengthening the layaway program.
Besides - retail IPOs are in the air.
Hudson's Bay Company, the owner of luxury retailer Lord & Taylor, is reportedly considering listing its shares on the Toronto Stock Exchange by as soon as November. Whether or not the KKR-led trio will seize a similar opportunity remains to be seen. The store sure has seen its share of management turnover of late not to mention increased pressure from the discount retailers, which have already begun the layover wars leading up to the holiday shopping season.
Nonetheless, Tabeo's timing is no coincidence. Toys R Us generates about half of its sales already from private-label items, according to The Wall Street Journal. And given the fact that the new electronic tablet for kids is exclusive to the store, the signs suggest that - if Tabeo is successful - maybe Toys R Us has uncovered its greatest strength.
Make no mistake; however, the kids' store is entering an already crowded playing field where there are some intimidating bullies. Amazon.com (NASDAQ: AMZN) is pushing its Kindle, Kindle Fire and Kindle Fire HD product line, which sell at a competitive discount and within the $159-$599 range, and raising the leverage it gives customers by agreeing - for a one-time $15 fee - to scale back its marketing efforts when Kindle users prefer.
Amazon, of course, competes head to head with likes of industry leader Apple, which is expected to introduce a mini-iPad soon, according to MarketWatch, not to mention 'Internet institutions' such as Google and Microsoft, which have muscled their way into the tablet arena.
Toys R Us may not outsell Amazon's Kindle where - according to the online retailer - sales keep outdoing the previous tablet version (Amazon is not transparent about those figures.) But that may not even be the toy store's strategy.
Profits continue to elude Toys R Us. In its 2Q, the retailer's loss deepened to $36 million from $34 million in the year-ago period, while sales fell a sharp 4% amid weakness stemming from Europe and sluggish video game results. Nonetheless, Toys R Us is in the tablet conversation now and if nothing else Tabeo is sure to earn the toy retailer a nod from its peers for simply familiarizing the next generation with the concept of tablet.
I'm going to check out the new Tabeo as I have a dozen kids to buy for this Christmas. Maybe I'll take advantage of Toys R Us' new layaway plan. But that doesn't mean that I'm going to overlook Improv's Boogie Board either - especially for the many two-to-four year olds in my life.
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