May 2, 2009
In today’s market, many businesses are struggling to stay afloat and many have been forced to close because consumers do not have the money to spend. What do you do when people cannot afford to spend money on luxuries and your business specializes in such things as electronics or children’s toys? Toys “R” Us seems to think they have the solution to that problem. They have announced that they are going to open a new convenience section, called the “R” Market, where they plan on carrying items like toilet paper, paper towels, laundry detergent, food and baby supplies. Sounds like a good idea to me. If you cannot stay afloat in your own market then move to one that is not doing so poorly. That is the way a market works. You stick with it as long as you are making an economic profit. However, Toys “R” Us is no exactly changing markets. They are just branching out in efforts to recover. I don’t see this working. They may get the occasional last minute shopper that forgot to buy toothpaste while they were at Wal-Mart, but that will probably be it. Parents that cannot afford luxuries are not going to take their children to the toy store just to but toothpaste. That is a tantrum waiting to happen. You take your kid to the toy store to buy toys not essentials. This is what Toys “R” Us is overlooking, peoples preferences. People prefer convenience, but not at the expense of there pocket book. They are still going to have to buy that toy they cannot afford. The demand for luxuries is low and simply offering something else of higher demand is not going to raise the demand for the luxury. Essentials and luxuries are two different markets and offering essentials in a market for luxuries does not affect the demand for luxuries.