The combined sales from Wal-Mart and Toys 'R Us account for a smaller percentage than these other distribution channels.
Another alternative may be to establish their own category killer store to replace Toys 'R Us. However, this is a risky move and is capital intensive. They would have to make certain that the market would be willing to accept this alternative. This alternative would require a heavy capital outlay and carries the greatest amount of risk. However, it may be a more cost effective alternative in the continuation of marketing research and product development. The costs and benefits of this alternative would have to be weighed against the risk.
In addition to expanding existing distribution channels other than Wal-Mart, toy manufacturers may wish to develop other distribution channels as well. For instance, they may wish to attempt to entice other retail establishments such as K-Mart, increase holdings in Target, Meijers or other similar mass merchandisers. This move is likely to receive a poor reception from Wal-Mart, as it will decrease their hold on the marketshare. However, it also represents better risk management as it distributes the losses over a greater number of players.
Of these alternatives, the best seems to be to increase current alternative distribution channels other than Wal-Mart, particularly with new products. This will entice customers to try out these new venues. Wal-Mart represents a major marketshare, but they are still small compared to other distribution channels. Diversity spreads the risk over a large area so that if a loss does occur, it is minimized in scope. It would cost little to establish other smaller distribution channels as compared to the cost of building and establishing their own retail establishment. New channels often cost more than increasing the use of established ones.
Customer Advantages
Many analysts assume that customers will automatically switch to Wal-Mart with the dissolution of Toys 'R Us. This would increase Wal-Mart's marketshare of the toy industry even further. However, there is also the possibility that customers will migrate to distribution channels other than Wal-Mart. This would mean greater competition and could result in price wars among distributors. This would theoretically increase demand for the products....
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