Thinking outside the toy box

This holiday, toys are popping up in the most unexpected places: gas stations, auto-parts chains, home and garden stores.

As toy prices fall and toy sellers falter, toy makers such as Mattel Inc., Hasbro Inc. and Lego Co. are counting on retailers that aren't in the toy business to prop up their sales. In turn, retailers such as AutoZone Inc., Bed Bath & Beyond Inc., and 7-Eleven Inc. are using toys to lure new customers and spur more impulse buying this holiday season.

''Toys are really everywhere these days," said Cheryl Zadeh, 30, while shopping for Christmas presents for her 8-year-old daughter at the South Shore Plaza in Braintree.

Hasbro produced a special Mr. Potato Santa set this holiday for grocery chain Publix. Toy maker RC2 Corp. made a John Deere toy tractor exclusively for Home Depot Inc. Mattel is launching its Car-Go Fun games for families on the road at Chevron gas stations. Lego rolled out a low-price line of its plastic blocks for supermarkets and drug stores -- 40 pieces for just $3.49. Walt Disney Co. is selling a special Milestone Mickey Mouse doll for $15.99 with a $25 purchase at Filene's department stores.

Though most shoppers don't head to AutoZone or Bed Bath & Beyond in search of toys, toy makers are betting they can entice shoppers into buying a Hot Wheels toy car set while they are there, or a multigame cube with cards, dominoes, and poker chips for $19.99.

''We want to be where the consumers are," said Wayne Charness, spokesman for Hasbro, of Pawtucket, R.I., the nation's second-largest toy maker. ''That means having to develop products that will sell at a variety of outlets from drugstores to dollar stores."

Faced with a shrinking pool of traditional toy stores and the growing dominance of giant discounters like Wal-Mart Stores Inc., both large and small players in the $20 billion-a-year toy industry are stocking the aisles of nontraditional toy outlets.

By selling toys in more places, toy companies hope to buoy sales, which have been down or flat in recent years.

Toy makers are also battling pricing pressures. Mass merchants and discounters now account for half of toy sales, while traditional toy stores represent just a quarter, said Darrell Rigby, head of the global retail practice at Bain & Co.

As the nation's biggest retailer and number one toy seller, Wal-Mart has the buying clout to demand lower prices from manufacturers. That power has allowed the Arkansas-based chain to undercut virtually every other big toy retailer, forcing Toys ''R" Us Inc., KB Toys Inc., and FAO Schwarz into desperate financial straits.

FAO Schwarz and KB Toys have both filed for Chapter 11 bankruptcy-court protection. Toys ''R" Us closed 146 stores earlier this year, selling most of them to Office Depot Inc. for $180 million. KB Toys plans to close 164 underperforming stores after the holiday season. To survive, these companies, too, are pushing back on toy makers, negotiating lower prices or exclusive deals on certain toys to give them a competitive edge against the bigger chains.

The result: Toy prices have been dropping an average of 5.5 percent a year, taking a big bite out of toy makers' profits, according to Rigby. The lower prices also mean toy makers have to sell more toys to maintain sales at the current level. By selling to convenience stores and drug stores, toy companies potentially broaden their sales base into retail outlets that won't push back on prices as much as toy stores and discounters.

''Toy manufacturers are looking for every source of growth they can find in this environment," Rigby said. ''It's important they do that. But most experts are forecasting that the toy industry will grow very slowly, if at all, over the next five years."

What's bad news for toy makers is good news for consumers. They're paying less for toys and finding them in more places. This holiday season, they can pick up gifts everywhere from 7-Eleven (Microsoft Corp. is pushing its Halo 2 Xbox video games at the convenience-store chain) to Urban Outfitters (toy and videogame maker Jakks Pacific Inc. is promoting its new line of retro video games like Ms. Pac-Man and Pong & Asteroids at the clothing-store chain).

Judy Salvucci, a 43-year-old mother of four, still relies on mainstays like Toys ''R" Us and Wal-Mart for most of her toy needs because they have the broadest selections. But that doesn't mean she's immune to the impulse toy purchase elsewhere.

''If I'm in the store and happen to see something, then I'll buy it," she said while shopping at the South Shore Plaza.

For retailers outside the toy business, the benefit of selling toys, especially during the holidays, is twofold. They use exclusive toy offers to lure new customers into their stores and distinguish themselves from rivals. They also profit by positioning toys near the checkout to encourage impulse buys.

AutoZone employs both strategies. In the four years since the chain began selling toy and model cars, it has emerged as the nation's number three seller of toy ''muscle cars," behind Wal-Mart and Kmart. For this holiday season, it struck a deal with Smart Planet to be the only automotive store selling the toy maker's $199.99 remote-control skateboard.

''We wanted customers to come in for a different reason," said Jim Shea, the chain's executive vice president of marketing and merchandising. ''We also want kids to have fun at AutoZone, to get them involved in cars, so when they're older, they'll think of us and come back to our stores."

Naomi Aoki can be reached at naoki@globe.com.