The long list of failed children’s toy retailers have one key point in common: The costs of getting products to stores were just too high. Whether Zany Brainy or Noodle Kidoodle or Learningsmith, the retailers all used hub-and-spoke models for their distribution centers. The manufacturer was responsible for delivering the product to the distribution center, but the retailer had to get the product into stores, as well as cover the cost of running the distribution center.

In contrast, Learning Express continues to thrive in this market, largely because manufacturers ship products (many of them exclusive to this chain) directly to the stores. The exclusive items help Learning Express offer lower priced options on things that customers cannot find anywhere else. To complement these exclusive items, it also stocks popular brands such as American Girl, LEGO, Melissa & Doug, and Playmobil. Thus customers also can find the brand names they know and like.

The largest product category for Learning Express is arts and crafts, which make up 12 percent of its sales. Preschool toys are another 10 percent of sales, and fitness, sports, and outdoor toys are the next largest category. The average ticket amount is $30–$35, though the store sells products at price points ranging from $1.99 to $199.

With this marketing mix, Learning Express earns high sales per square foot ($450–$500). The stores perform especially well when they locate in the same shopping center with an upscale supermarket such as Whole Foods. In this case, customers doing their regular grocery shopping can keep the children happy by promising a convenient trip to the toy store at the same time.

Discussion Questions:

1. How do logistics affect overall profitability in this market?

2. What are the advantages of brand name products versus exclusive private-label products for retailers like Learning Express?

Kimberly Pfaff Tchang, “Lessons Learned,” SCT, August 2011.