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When it comes to toys, supermarkets aren't playing games.Retailers, manufacturers and distributors are gathering in New York at the Toy Industry Association's International Toy Fair this week in the wake of some new developments on the supermarket toy front.Some supermarkets, like Giant Food, Landover, Md., Safeway, Pleasanton, Calif., and Price Chopper, Schenectady, N.Y, have been testing toy sets

When it comes to toys, supermarkets aren't playing games.

Retailers, manufacturers and distributors are gathering in New York at the Toy Industry Association's International Toy Fair this week in the wake of some new developments on the supermarket toy front.

Some supermarkets, like Giant Food, Landover, Md., Safeway, Pleasanton, Calif., and Price Chopper, Schenectady, N.Y, have been testing toy sets more aggressively by teaming up with major toy retailers.

Retailers and analysts said supermarkets are prime, kid-friendly outlets to offer dolls, toy trucks and games.

"It is worth our while to merchandise toys because a majority of our customers are women with children," said Mona Golub, manager of public relations and consumer affairs, Price Chopper, which has been partnering with retailer K-B Toys to offer a toy assortment in its supermarkets.

She said partnering with an outside vendor helps because "it allows us to merchandise a more complete assortment without having to go through several sources of supply."

Industry observers said toys are a category ready for expansion into alternative distribution channels.

"It always seemed supermarkets had a huge opportunity that they haven't tapped yet," said Julie Halpin, chief executive officer, The Geppetto Group, New York.

Retail sales for the toy industry, including video games, reached $30 billion in 2001, according to The NPD Toy Market Service Index, part of the NPD Group, Port Washington, N.Y. Sales in the food and drug channel contributed 2.9% of toy retail sales in 2000, the latest year for which figures are available, vs. 3.4% in 1999.

Michael Glazer, president of K-B Toys, Pittsfield, Mass., told SN, "We have a lot of ideas of what worked and what doesn't work and certainly the tests we did this past fall with Safeway, we learned a lot."

As previously reported in SN, Safeway rolled out a test program in over 1,000 stores this past winter, merchandising toy displays of about 100 stockkeeping units provided by K-B Toys. While the sections were not branded with the K-B Toys name, Glazer said several exclusive K-B Toys learning tools were sprinkled within the mix. He said Price Chopper has more of a year-round program with K-B Toys.

Glazer said K-B and Safeway were "both quite pleased" with the program and both partners are looking to the possibility of going forward, but he declined to give further details.

Safeway representatives were unavailable for comment.

Giant Food currently is testing a much more extensive Toy R Us-branded program in four stores. Barry Scher, Giant spokesman, said the program is still in its testing mode, and there are no plans to expand the test to other stores.

"It's an opportunity to test a new venture and further our longtime emphasis on one-stop shopping," he said.

The Toys R Us program, which caters to all age groups, was placed in stores that have young families in surrounding neighborhoods.

Chris Grindem, senior partner, Integrated Marketing Solutions, Lincoln, Neb., said the partnerships between supermarkets and toy retailers could be good drivers of incremental sales for both parties.

"It's a win-win situation because it allows the toy retailer the ability to have a presence in a venue that customers come to significantly more often," he said.

Carol Orgel Postal, president, international licensing/retail consultant for the COP Corp., New York, agreed that toys present yet another opportunity for one-stop shopping.

"In terms of value to the customer, it offers another avenue for purchasing product that's not traditionally supermarket-based," she said. "The fact that retailers can merchandise a toy area, it's excess business they didn't have before."

Grindem also noted that providing a toy retailer-branded toy section gives supermarkets more credibility in the category.

"Why reinvent the wheel? There's a comfort in saying Toys R Us is doing this [program] as opposed to supermarkets trying to get into the toy business," he said.

Halpin said children accompany their parents on grocery shopping trips about 20% to 25% of the time, which could drive toy sales.

"The toy category has a unique opportunity to tap into the psychological dynamic, to bring in that unexpected joy element," she said.

Some supermarkets have had some success in the toy category by using their own merchandising ideas developed in-house.

Bob Yehling, director of general merchandise, Harps, Springdale, Ark., said the retailer competes with nearby dollar stores like Dollar General and Dollar Tree by offering inexpensive closeout toys in the stores' 8-foot toy sections.

"We do big business in toys," he said.

Among general merchandise offerings, Yehling said it is the third best-selling category, behind seasonal and housewares.

"If you do it yourself, you'll get a better price," he said. "If it's not at the right price, it's not going to sell. Be competitive, put [toys] in seasonal, and you can do some business."

He also pointed out that finding the right distributor is important.

Retailers have several hoops to jump through to become successful toy merchants, according to analysts.

Dollar stores are a strong competitor in the category and "take peg toys away from everyone," Yehling said.

Not only do supermarkets have to contend with dollar stores and competition from the Top 5 toy retailers -- Wal-Mart, Target, Toys R Us, K-B Toys and Kmart, respectively -- they have obstacles to overcome within their own stores.

"The biggest challenge for a supermarket is space," Halpin said. "From a margin standpoint, I don't know if it's better to stock a shelf of Crayola than a shelf of Coke. That's a critical decision supermarkets have to make."

She said supermarkets have a better chance of merchandising "evergreen" and classic toy products to capture year-round impulse purchases, rather than put out the faddish holiday "it" toy.

Glazer pointed out that another hurdle for nontraditional toy retailers is the fact that they have less leverage with major toy manufacturers than traditional toy stores.

"It's very difficult for a supermarket, where it's not its core business, to have a meaningful relationship with vendors like Mattel and Hasbro and manage that category," he said.

Some retailers do not try to market their toy sets aggressively, but instead offer them as a simple customer convenience.

Dan Van Zant, director of general merchandise, C&K Markets, Brookings, Ore., said there are toy sections in 37 of the chain's 48 stores, although sales in the category are minimal.

"It doesn't seem to be a growing category for us," he said. "It's rather stagnant, but it pays for itself in terms of the space allocated for it."

C&K Markets carry a mix of novelty boys' and girls' toys in 4-foot to 8-foot sections in the cereal aisle.

"The cereal aisle is the best location because children pick out their favorite cereal and the toys are there as an impulse," he said.

The supermarket might not be the first place consumers choose to buy Barbie or G.I. Joe, but retailers and analysts seemed to agree there are opportunities to capitalize on supermarkets' family-friendly image and capture incremental sales.

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