Store wars for toy merchants: retailers scramble to acquire hot holiday merchandise.

It was nearly a month before Christmas, and Brad Madrid, manager at Buddy Brown Toys in Studio City, already had a holiday headache.

The hot-selling Sing and Snore Ernie doll was sold out. Madrid placed a frantic call to a wholesale toy distributor and ordered two dozen more.

"We only got half a dozen," sighed Madrid.

The trials and tribulations of panic-driven parents on the hunt for the blockbuster toy of the season are well-chronicled, but the real pressure is on toy sellers.

The last thing they want is unhappy customers, especially at a time when consumer traffic is at its highest. Customers disgruntled about a lack of selection tend to take their business elsewhere - sometimes permanently.

A number of strategies come into play for retailers when a toy starts jumping off the shelves. These strategies differ depending on the size of the merchant, but their goal is the same: getting the toy to the store and to the shopper as soon as possible.

Unlike the giant chains that can reallocate merchandise among their various stores, when an independent runs out of a toy it has to get a little more creative - sometimes even taking unusual and desperate measures.

"It really gets competitive," said Madrid.

Around this time last year, Madrid recounted, a man came into his store posing as a parent and kept coming back to buy more of a popular action figure.

"I found out later that the guy had a store at the other end of town," Madrid said. The man was buying his hot toys, then selling them to desperate parents at a big markup.

When a holiday-season toy gets hot, it is usually too late for retailers large or small to order more from the manufacturer. So independents often turn to secondary sources, which include out-of-the-way toy distributors in the East Coast and Canada that can charge 30 percent to 40 percent more than the manufacturer.

"This hurts an independent retailer from the standpoint that they have to raise their retail price," said Rich Brady president and buyer at Playco Toys and Entertainment based in San Marcos, Calif., which operates 21 toy stores in the Western United States.

Although smaller retailers don't like to pass on the extra cost, they say shoppers will pay the higher price if it means getting a hot toy in time for the holidays.

"I'm in an area where parents have to have the toy no matter what," said Bob Henry, manager of Westwood's Toyorama, where Sing and Snore Ernie is selling for $39.99 (compared to $30 at big chains like Toys 'R' Us).

"I'd rather not charge a higher price, but if the choice is between not having the toy or having the toy and having to charge more, I'd rather have it," he said.

Other retailers like Kip's Toyland in Los Angeles, where Ernie is going for $49.99, turn to an even pricier source when distributors run out of toys: the specialist.

These are basically middle-men who buy up toys they suspect will be popular well in advance of the holiday season. When the items begin to sell out, these specialists sell the toys on consignment for a big markup, sometimes three times the manufacturer's price.

In these instances, retailers will absorb most of the cost.

At giant toy retailers like Toys 'R' Us and discount department stores like Target and Walmart, getting the toy to the consumer is the responsibility of buyers.

For the large chains, reallocation is the name of the game. By the holiday season, it is already much too late to order more toys from the manufacturer in meaningful quantities. So buyers, using sophisticated inventory tracking systems, can only reallocate merchandise from slow-selling stores to the fast-selling areas, often air-shipping them for quicker delivery.

Thus, for large chains, the ability to track inventory quickly is critical.

"We have processes in place that monitor the inventory. If it's getting low we do the best we can to get it to the distribution centers as quickly as possible," said Rebecca Caruso, spokeswoman for Toys 'R' Us.

A state-of-the-art inventory tracking system, known as POS, or point-of-sale, has made it possible for buyers to know instantly how many toys are selling at each store. Computerized systems connect cash registers to a central database so the buyers have up-to-the-minute, real-time information.

"What the POS allows me to do is see when I have a product that's really hot in one store and not in another," said Brady of Playco. "It allows me to change the shipping pattern."

While the strategies of small and large retailers differ, they do sometimes bump heads along the way. In an industry in which more than half the annual sales take place during the fourth quarter, competition for the hottest holiday toy can get nasty.

Some small retailers claim toy manufacturers will bend to the demands of the larger retailers and cancel their orders in advance of the holiday season when it becomes clear that a certain toy is going to become popular.

"They'll tell us at the last minute, 'Sorry, your allocation has been pulled,' said Henry at Toyorama. "I should be entitled to an allocation on anything that's hot, (but) it doesn't go tome because I'm a small guy."

Sally H. Wallick, an analyst at Legg Mason Wood Walker Inc. in Baltimore, Md., agreed that manufacturers may in fact give short-shrift to smaller customers.

"If you're a toy manufacturer and Toys 'R' Us uses a little bit of muscle, you're probably going to pay attention," said Wallick. "You do a large amount of business with them ... it's a natural thing to reward them occasionally."

But Neil Friedman, president of Tyco Toys (the subsidiary of Mattel Inc. that makes the Sing and Snore Ernie doll), denied that his company plays favorites.

"We work the same way with all retailers," he said.

By this time, many retailers large and small have already run out of toys like Ernie, and their prospects of getting more are slim.

"We're probably getting more than 75 calls a day," said Jane Delfaviero, manager at Target's Pasadena store, which ran out of Ernie a few days ago. "They probably aren't shipping any more."