• The Wall Street Journal (subscription required), Friday, December 15, 2006 11:30 AM

FAO Schwarz CEO Ed Schmults' strategy to resurrect the fabled New York toy store is a complex formula of razzle-dazzle, exclusive toys and a little bit of magic, combined with a large helping of attention to detail. New hires from clerks to toy demonstrators are drilled in customer service and tested on their knowledge of toys.

While FAO is positioning itself as unique in the market, according to industry analyst Chris Byrne, the question remains whether the experience is "worth paying $5 or $10 more for a Teddy bear."

Discount chains like Wal-Mart and Target account for 57% of all annual toy sales; toy stores make up just 17%, according to NPD Group. When FAO tried to compete with bargain prices, it lost its cachet, business dwindled, and it was forced to file for bankruptcy twice in 2003. Overall, the brand has been on the rise since then, posting a 20% year-to-date increase in sales over this time last year.

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