Contemporary Enterprise Case Study topic

Introduction

There is no denying it. Its tough for an independent toy

store to compete against Walmart, Target, Toys R Us,

and other large retailers (including online giant retailer

Amazon.com) selling products that entertain children and

adults alike. So how is it that Kazoo Toys, an independent

toy store in Denver, Colorado, is thriving? Its thriving

because of two thingsthe firm has a doggedly

determined entrepreneur at the helm and it has a good

business plan. After you read about Kazoo Toys, youll nod

your head and think to yourself, yupthats a good plan!

Diana Nelson

In the early 1990s, Diana Nelson left the corporate world

with the intention of spending more time with her two

young sons. In 1998, she decided to reenter the

workforce, but this time as an entrepreneur. Rather than

starting a company from scratch, she set out looking for

a business to buy. After ruling out fast food and flower

shops, she came across a toy store named Kazoo &

Company. She saw untapped potential in the store and

decided to buy it. It wasnt easy to get the money

together to close the deal. To finance the purchase, she

cashed out her retirement accounts, put $25,000 on

credit cards, borrowed money from her father, and set up

a $500,000 SBA-guaranteed bank loan. I gambled

everything to buy a toy store, she says. The actions

Nelson took to finance her venture demonstrate the

courage that characterizes virtually all entrepreneurs.

From the outset, Nelson had no illusions that

owning a toy store would be easy. When she bought

Kazoo, independent toy stores were being tattered to

pieces by Walmart, Toys R Us, and other large

retailers. So, she knew that the only way to beat them

was to outthink them. In this regard, Nelson saw her

challenge as that of designing and then implementing a

business plan that would make a small toy store

competitive. Heres how she did it.

Kazoos Business Plan

The essence of Kazoos business plan was to not try to

be like Walmart or Toys R Us. Instead, Nelson set out

to build a business that would offer unique products and

services to its clientele. The mistake that many small

businesses make, in Nelsons thinking, is that they set

themselves up to compete against the chains (e.g., Toys

R Us) or a big-box stores (Walmart) by trying to

duplicate what they do. In these instances, the best an

entrepreneurial venture can expect to do is to come close

to being as effective at what the big boys are skilled at

doing. Instead of falling into that trap, Nelson took Kazoo

in a different direction. We changed our whole

merchandise mix to not carry the same product (as the

nationwide chains did), she recalls, so price

competition isnt an issue. As a result of this strategy,

Kazoo doesnt carry Mattel, Crayola, or Fisher-Price.

Instead, the store sells unique items like Gotz Dolls from

Germany and a wide range of educational toys. The key

to making this strategy work, Nelson found, is to build

strong relationships with vendors. To help do this, Nelson

invites many of Kazoos vendors to demo and test new

products in her store. Doing this gives Kazoo first crack at

many of the new products that its vendors make. While

they are in her store, the vendors also tip their hand from

time to time regarding what the big retailers are buying.

This gives Nelson and Kazoo a heads-up about what

not to buy.

In 1999, Nelson opened a Yahoo! store online. The

site sold the same type of toys being sold in the store.

Over time, Nelson increased her Internet prowess and

now her Kazoo Toys Web site sells many of the same

products that are sold in the store, along with

additional products that are drop shipped by vendors.

At one point in the early 2000s, Nelson considered

franchising Kazoo but decided to pass on the idea.

Instead, she felt it was better to preserve Kazoos

destination image and build the e-commerce site.

Now, with nearly 15 years of experience as Kazoos

owner under her belt, Nelson has decided to pursue

franchising, and Kazoo & Company will begin

franchising at some point in the near future.

Points of Differentiation

Through all of this, Kazoo has established strong points

of differentiation between itself and its much larger

competitors, which has been the heart of Kazoos

business plan from the beginning. Along with carrying