Chip Taylor

Cheaper toys for your kid

Some people act like that's a bad thing.

From the Washington Post:

In 1997, Tree Top Toys Inc., an independent retailer with stores in the District and McLean, began carrying a nifty children's toy called Chunky Farm. At $32, the collection of large plastic farm items, including a barn, a rig and a cow, sold briskly and earned Tree Top a nice profit because each cost Tree Top only $16.

About 18 months ago, however, the store dropped Chunky Farm from its lineup, not because it sold poorly but because it had suddenly begun flying off the shelves at a nearby Wal-Mart. Tree Top's toy buyer spotted it there for about $14.

"I can't compete with that," said the buyer, Susan Hancuff-Sellers.

Looks like an increase in consumer surplus to me.

Everybody seems to agree that "fierce" competition from Wal-Mart drives down toy prices.

Less understood is Wal-Mart's impact on smaller retailers such as Tree Top, which appeal to wealthier customers who do not necessarily make purchases based on price. It is those stores that take big gambles on new toys, only to see them snatched up by Wal-Mart.

If the stores aren't competing on price (which would contradict Ms. Hancuff-Sellers' statement about not being able to compete) then Wal-Mart wouldn't have any effect.

If they are, then it looks like some of the rich folk may have to go rub elbows with the hoi polloi to buy the toys they want.

What about this?

When Tree Top employees believe the stores must keep a more expensive product on the shelves, they often cut back on quantity, leaving just enough inventory to satisfy demand.

I'm no retail expert, but isn't matching inventory to demand a good idea in any case?