It's like this in the tablet market: 52% of tablet owners are gripping an iPad and 21% are clutching a Kindle Fire. The rest of the market is blanketed with additional Android devices. Tablets are expected to reach $66.4 billion in sales this year and the toy retailer with a giraffe for a mascot wants a piece of the action.

Enter the Tabeo
Just what is a Tabeo? It is a Toys "R" Us, kid-friendly, Android-driven, 7 inch tablet device filled to the brim with parental controls. It is aimed at kids and tethered to a kid-friendly app store and comes with 50 pre-installed, education and entertainment oriented apps: books, games, Angry Birds and Fruit Ninja.

The Tabeo contains 4 GB of storage (capable of 32 GBs), a front-facing camera and an HDMI output, has Internet wi-fi capability and 10 hours of robust battery life (6 to 7 for video). It also is encased in drop-safe bumpers, so the kids can sling it around the house all the live-long day. Perhaps most importantly, it carries a $149.99 price tag versus $199 for a Kindle Fire HD and $499 for a 16 gig iPad.

The device is slated to be in stores October 21st.

The Underbelly of Retail: Show-Rooming
The chief intention of the Tabeo is two-fold: to provide the market with a kid-friendly device that is "safe" and chockfull of internet-filtering parental controls, tethered back to a kid-friendly, curated app store, and to eliminate show-rooming, a practice where consumers try out a product in-store and then purchase it elsewhere for a better price.

Toys "R" Us is no stranger to the underworld of show-rooming either; the retailer currently offers kiddie tablets such as the Meep and the Kurio both of which are ideal, show-room products, and they understand the significance of the issue. A recent comScore report indicated that 22% of customers bought toys online after show-rooming and 63% bought consumer electronic products. The Tabeo will be available exclusively at Toys 'R Us making it impossible to test-drive in-store and then purchase elsewhere.

The Tabeo App Store
As part of the kid-safe experience, the Tabeo will be wired to the Tabeo app store, a kid-friendly app environment curated by the folk at Geoffrey's house. Additional apps (currently 6,000 are available) can be downloaded for free from the Tabeo store. On a side note, Toys "R" Us is entering the $750 million video-on-demand market and will make available an additional Tabeo-app that allows for the streaming and downloading of over 4,000 kid-centric movies and TV shows.

Kid-Size Competition
Toys "R" Us faces not-so-sugary competition from the likes of:

  • The Kurio Tablet - 7 inches of Android by Techno Source.
  • The Meep - an Android tablet, created by Oregon Scientific.
  • Lexibook Junior Tablet - yep, you guessed it, Android driven.

Each tablet is priced around $149.99 and contains fairly comparable Tabeo content, parental controls and features.

Enter the Geoffrey
Toys "R" Us recently acquired the exclusive rights to operate FAO Schwartz and, in the not-too-distant past, struggled with flailing operations, bottom of the barrel customer service and knock-out-blow price competition from the likes of Wal-Mart (NYSE:WMT), Target (NYSE:TGT) and online retailers. In the 90s, the company realized a steady decline in U.S. market share, dropping from 25.4% in 1990 to 18.4% in 1997. Operating margins fell from 12 to 8% from 1993 to 1997 amid a trend toward lower prices. In 2005, an investment group consisting of affiliates of Bain Capital Partners LLC, Kohlberg Kravis Roberts & Co. (NYSE:KKR) and Vornado Realty Trust (NYSE:VNO) completed an acquisition of Toys"R"Us, Inc. for $6.6 billion.

The House that Geoffrey Built
Recently, Toys "R" Us has been suffering from cut-throat price competition with its chief competitors Walmart and Target. Sales are flat and profits have declined over the last two years. The store plans to hire 45,000 seasonal workers for the holiday season in expectation of a modest bump in sales this year, up 5,000 from last year. The Tabeo serves as part of an "expanded electronics" tactic of an overall turnaround strategy for the company, which includes growing its exclusive brands, opening express locations and effectuating omnichannel offerings.

The Bottom Line
Toys "R" Us is familiar with the tablet market for kids and it is also familiar with the sting of consumers test-driving products, walking out and then purchasing them elsewhere. In answer to this retail cancer, the toy giant is introducing the Tabeo, a feature-rich tablet device for kids, available exclusively through its retail channels. The product fills a market need for safe, kid-friendly tablet entertainment and education and it also aims to push Geoffrey a little further down the strategic turnaround treadmill.

At the time of writing, Adam Brownlee did not own any shares in any company mentioned in this article.

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