• by Thom Forbes  @tforbes, September 10, 2012

Tablets. Tablets. Tablets. Throw in a few new smartphones and It seems like that’s all we’ve been writing about lately. So why would a quintessential big box retailer like Toys“R”Us get into the fray today with its own proprietary device -- dubbed the tabeo (with a lower-case “t”) -- targeted to kids? Basically, because competitors shipping overnight from cyberstores in the boondocks can’t undercut the price if they don’t have the product in the first place.

"It is our strategic position to offer products that you can't find anywhere [else] or be compared on price," Troy Peterson, vp and divisional merchandise manager at the Wayne, N.J.-based retailer,  tells the Wall Street Journal’s Ann Zimmerman. 

Toys“R”Us CEO Jerry Storch has arguing that private label products are the best way to win price wars with competitors such as Walmart since he joined the company six years ago, Joan Verdon points out on Northjersey.com, the website of The Record newspaper.

“This 7-inch, multi-touch tablet features 50 free, preinstalled apps that were carefully selected to entertain and educate children, while helping them explore the Internet,” according to a release on PR Newswire. “Making online safety a top priority, tabeo was designed with integrated parental controls that offer the flexibility to customize levels of Internet access for each member of the family.” 

“All in all, the tabeo does seem to point towards a tablet that caters more for the older kids compared to the younger generation,” surmises Ubergizmo blogger Edwin Kee after glancing at some product shots, “but it does seem to have its fair share of features that do cater to the younger age group.”

The tablet will be available exclusively at Toys"R"Us stores nationwide beginning Oct. 21 for $149.99. It is based on Google’s Android OS, which may prove to be an advantage against successful products such as LeapFrog’s tablets that use proprietary operating systems, Ray Willington suggests at HotHardware.com.

Customers can place pre-orders at tabeo.com, which this morning consists only of a splash page touting the parental controls, pre-installed apps, available games and educational programs as well as its 4 GB of storage, WiFi and HDMI capabilities, 7-inch screen and front- and rear-facing camera.

The WSJ’s Zimmerman points out that there are considerable risks beyond the obvious one of so many competitors, including hand-me-downs from adults as well as “three similar, child-oriented, Wi-Fi-equipped tablets already on the chain's shelves” -- the Kurio 7, Meep and Lexibook. Indeed, the three have already matched the tabeo’s $149.99 price. 

In addition, it will have to eat the manufacturing costs if the product doesn’t fare as well as Toys"R"Us hopes in the increasingly cluttered marketplace. "The downside to private-label products is, if they flop, and have to be discounted, the retailer can't beat up the manufacturers," Sean McGowan, Needham & Co. toy analyst tells Zimmerman. "That's not an insignificant part of the toy business."

But Toys“R”Us evidently believes it has identified the hot buttons that will differentiate it from all those other offerings. "Over the past year, we've spent considerable time talking to parents and children to determine what features and functions they really want in a kids' tablet, resulting in tabeo,” Peterson says in the press release.

There are 874 Toys“R”Us and Babies“R”Us stores in the U.S. and Puerto Rico, as well as 625 international stores and 145 licensed stores. The company last week announced that net sales had dropped 3.6% in the quarter that ended July 28, according to Reuters, with the largest decline in Europe. It “also blamed lackluster demand for electronics, video game hardware and software for lower sales,” Dhanya Skariachan reported.

In an effort to goose sales, the company announced Sept. 3 that it would waive the upfront service fee for layaway orders created in store from Sept. 4 through Oct. 31, with a $5 service fee after that date. There is no minimum purchase price, according to an AP story.

"Toys“R”Us is in a really hard place," M. Eric Johnson, associate dean of the Tuck School of Business at Dartmouth College, tells Zimmerman. "The toy business is becoming a tougher game, and the Web is slowly killing off the big-box phenomenon."

In an article about the company’s efforts to reinvent itself -- and perhaps get a long-delayed IPO back on the track -- the New York Times’ Stephanie Clifford and Peter Lattman last April quoted something CEO Storch said in a company newsletter about five years ago: “Our competition is good, but we can’t blame them. We are not victims! Our fate is in our own hands!”

Some of that fate now rides on how many little hands wind up pressing icons and swiping pages on the tabeo.