As mass-market behemoths gobble up more and more of the kids retail landscape, it’s becoming increasingly important for mid-sized retailers to stake out a market niche. Hayward, California-based Mervyn’s seems to have hit its stride by utilizing the power of license.

For the past year, the company has been focusing on building licensed in-store boutiques that feature apparel, accessories and toys. Pam Burke, Mervyn’s senior buyer for basics, accessories and sleepwear, says the boutiques have sparked 25% increases in licensed apparel sales over last year. ‘When I just purchase a few toys and accessories that don’t really relate to anything, we don’t get as big of a bang for our buck,’ she says. ‘If we do a shop concept, we can do US$800,000 to US$1 million in a six-week period on a license.’

A family-oriented department store chain with 266 U.S. locations, Mervyn’s is a relative newcomer to the toy business and still only carries items that fall under a US$10 or US$20 price point. ‘My toy business right now is phenomenal – all because of licensed toys,’ Burke says, adding that 2003 toy sales for the chain are up 140% over last year. ‘Toys enhance the presentation and give the customer that one extra gift item to buy.’

Mervyn’s is definitely planning to expand the boutique program, following recent successes with properties like Disney Princesses in the spring and Sagwa the Chinese Siamese Cat at the beginning of the year. The boutiques usually target a wide range of demos from babies up, though a recent Dora the Explorer store was aimed specifically at drawing in the Hispanic kids market.

Burke says she is hunting for more retro properties in 2004, and she’ll be eyeballing both ’80s toys that have been brought back to life (such as Strawberry Shortcake, Care Bears and Rainbow Brite), and nostalgic properties like Schoolhouse Rock, which launched as a Mervyn’s boutique in August.