Photo: @5byseven via Twenty20
Toys ‘R’ Us prepares its American comeback
Can a new version of Toys “R” Us succeed where the previous business did not? The former chief merchandising officer with the toy store chain, which closed its doors in the U.S. last year, thinks it can. Many vendors, who lost a major trading partner and money when Toys “R” Us shuttered its stores, are hoping it will.
According to reports, Richard Barry, CEO of Tru Kids, the company that now owns the Toys “R” Us trademark, has told vendors that plans are underway to open up to six new stores and launch a website later this year. Unlike the big boxes that Toys “R” Us operated before the chain liquidated, the new locations will measure around 10,000 square feet, including play areas.
Rather than buy goods from suppliers, the retailer may seek a consignment arrangement with vendors to help keep costs down, according to Bloomberg.
Isaac Larian, CEO of MGA Entertainment, which makes Bratz dolls, Little Tikes and L.O.L. Surprise!, welcomes the return of Toys “R” Us. “This market needs a self-standing toy store, that’s for sure,” he said. “We will sell them inventory.”
Mr. Larian, who tried to rally investors to save Toys “R” Us before it went under in its previous incarnation, more recently told the Los Angeles Times that his attempts to create a deal that would merge MGAE with toy giant Mattel had failed.
Since Toys “R” Us shuttered its stores in the U.S. due to a crippling debt load, a wide range of retailers have been scrambling to capture some of the $7 billion in sales the chain used to generate. Amazon.com, Party City, Target, Walmart and other retailers, including department stores, dollar stores, drug stores, supermarkets and warehouse clubs, have sought to gain from TRU’s loss.
Last November, Kroger sold a line of branded toys in 600 of its Ralphs, Smith’s, Fred Meyer and namesake banners with displays featuring Geoffrey the Giraffe, the Toys “R” Us mascot.
- Toys ‘R’ Us, back from the dead, will open U.S. stores, e-commerce site – Bloomberg/Richmond Times-Dispatch
- Toys R Us to reportedly open new stores later this year – CNBC
- Is Toys ‘R’ Us starting its comeback in Kroger’s aisles? – RetailWire
- Toy executive Isaac Larian ends pursuit of merger with Mattel – Los Angeles Times
Discussion Questions
DISCUSSION QUESTIONS: Will American consumers return to new Toys “R” Us stores or have they permanently moved to other retailers at this point? What do you see as the biggest challenges and opportunities facing the retailer in its comeback attempt?
Poll
BrainTrust
Georganne Bender
Principal, KIZER & BENDER Speaking
Lee Kent
Principal, Your Retail Authority, LLC
With only 6 stores, there’s only so much impact the new Toys “R” Us can have. Of course, there are legions of people who still admire and appreciate the brand, but I’d say the majority of shoppers have simply moved on to other sources — there was virtually nothing TRU sold that you couldn’t buy elsewhere. The big challenge will be regaining consumer trust and trying to reestablish relevancy in a very large market with many competitors. I appreciate the effort, but I’m not sure this will be anything but a single-base hit at best.
With plans for only six small physical locations this year, there isn’t enough critical mass to revive the brand name. Right now Toys “R” Us feels more like a pure-play e-commerce retailer than a robust omnichannel retailer. And — if that’s true — how does the new brand compete effectively with competitors like Walmart, Target and Amazon? The first two have the advantage of huge scale and physical stores complementing their websites; Amazon is, well, Amazon.
If I were trying to revive the brand, I would find a “store within a store” opportunity with a compatible retailer. Space within Barnes & Noble, for example, might make more sense than the current game plan. B&N has its own issues but at least has a lot of locations where the Toys brand might reestablish itself.
B&N is already a massive specialty toy merchant on its own, with a well-regarded selection and reputation (coupled with a strong affinity program) — I don’t see anything that the ghost of TRU could bring that would make them more effective.
Unless they go to something very original, like a showroom model, you can just use and old New York-ism for this: fahgedaboudit!
A crawl, walk, run approach might be the best strategy for the revitalized Toys “R” Us brand. There certainly is a large void of engaging, experiential and entertaining toys stores, and perhaps there is room for a quasi Toys “R” Us comeback. The tired and high-cost big box toy stores are no longer where customers what to shop. Rather, it’s about the art of toys, the storytelling, and highly curated assortments that will drive interest in the brand.
Rather than going the big box route, current public discussions are to concentrate on seasonal pop-ups in available, cost-effective commercial real estate in existing malls. Inventory costs would be held by the vendor until the post-sale, which is essentially on a consignment basis. There is an opportunity to capitalize on a still well-known brand to stimulate the toy store market.
This Toys “R” Us kid is very curious to see how this plays out.
Just because the company has the same name, it doesn’t mean that the stores will be the same as their predecessors. Why do we bother?
We need standalone toy stores because there is nothing like them. It seems to me that CEO Richard Barry has thought this through, as have the toy vendors who are supporting him in getting TRU back in business. After all the bad retail press these past years, it’s heartening to see people working together to help this iconic retailer get back on its feet.
My kids grew up in the aisles of Toys “R” Us. Call me sentimental, but I’m happy that my grandson will have the chance to be a Toys “R” Us kid.
For the 2 or 3 generations that grew up with Toys “R” Us, yes, they will return to these stores and once again enjoy shopping in a toys only store. Their biggest challenges continue to be online retail and of course Walmart. If they can compete and keep their stores up to date with the latest inventory, their few stores have a real chance at success.
A lot depends on the location of the stores too! The biggest opportunity is to go slow and not open hundreds of stores and create too much debt. So far they appear to be doing it correctly and a consignment strategy may prove to the right one.
If the stores consist of just rows and rows of products that essentially provide the same, but arguably a worse, experience than online — than no, this won’t be a successful comeback. Hopefully they are using their six store rollout as a testing grounds for in-store innovation while they also rebuild their online presence. No need to build-out 100 stores right from the get go. Fingers crossed Toys “R” Us can regain the magic it once held!
The new Toys “R” Us story plays on (recent) nostalgia of the old brand without the negative associations. The new format carries a smaller footprint infused with a play area while costs are reduced through potential consignment arrangement and a clean(er) balance sheet.
Chief merchants have an intuitive sense for the business and what makes it successful. However, being human means falling into fallacy traps and avoiding cognitive dissonance. I’d like to think that this investment decision is backed by solid research and objective data and not ones designed to deliver the expected answer. That said, an initial six store “test” ahead of the holidays ought to reveal whether or not we really need a stand alone toy store and its potential configuration.
This is a brand-revival attempt, and the thing with reviving a brand is that you are trying to capitalize on the goodwill that brand enjoyed before its demise.
In this case, it’s not clear Toys “R” Us has that same goodwill among consumers that it used to. There wasn’t anything unique about the old Toys “R” Us shopping experience, and everything they sold could be found elsewhere, often at a better price.
I expect we’ll see comparisons of their new store format to the FAO Schwarz in New York City. FAO pulled off a very nice experiential toy store — can TRU do the same? One difference here is that FAO Schwarz had much more goodwill associated with its brand than TRU does, so this is already an uphill battle.
With only 6 stores, the real impact will come from e-commerce, unless they strategically locate those 6 stores and generate plenty of PR buzz at an Amazon-level to draw attention from consumers. It will be a tough road for them!
A reborn Toys “R” Us can be operate small scale and online. Six stores in the right locations can succeed. Manufacturers are likely to support them since it’s a small bet to ship inventory or sell on consignment with only six stores. An online store with drop shipping or a similar model carries little risk. The clearance of debt gives the business model more buoyancy.
Ona larger scale, Geoffrey would run into the same buzzsaw of Amazon.com and mass merchandisers like Target and Walmart that use toys as loss leaders. And a half dozen doors won’t give it the ability to buy online, fulfill in store. Don’t expect an epic comeback, but the positive PR being generated will float a lean revival — if they avoid backlash from ex-employees who missed out on severance.
Retail today, to survive, must have some combination of specialized merchandise and outstanding customer experience. I am not sure if TRU will be able to thrive on selling best-sellers to customers who need the product today, not with Amazon and Walmart moving into same day delivery.
There is always a market for great customer experience, especially in retail locations with smaller footprints. I hope they focus on highly trained staff who can help specific customer segments find that perfect gift for children.
If a six-store chain starting from scratch with no actual sales history expects vendors to hold all the inventory risk with consignment, then what’s going to stop a struggling mom-and-pop single store from demanding the same? Consignment has all sorts of pitfalls and only works when the retailer is healthy and growing with hundreds of locations and has robust, reliable forecasting capability.
This is what 3rd-party wholesalers are for — try a little, sell a little, buy a little more. Aggregate that over hundreds of small stores and then a manufacturer can achieve economies of scale shipping truckloads.
As a midsize toy and game manufacturer, I could never get on board with this TRU concept. If you don’t have the volume and capability of a Target, then don’t expect to get treated like a Target.
Let’s not forget what put Toys “R” Us out of business. It was not their reputation, but the debt piled up by their owners. When I hear people talk about Toys “R” Us, it is with shock that they closed their doors. Even with only 6 stores, I think they have a go at it and the people will come. I also love the store within a store concept for them to help get back up and running. I honestly think people will come. For my 2 cents.
As you know, we (Kay Bee Toys) are also working on coming back. We should be announcing something shortly as well.
Richard’s reputation is very good within the toy industry, but the big problem is the others from TRU he’s bringing in and the “open wounds” from the BK.
We had a major head start when looking at bringing back KB Toys and our plan is much more thought out as that was our goal when we acquired the brand. The question we posed was, “How can we create a long-term, sustainable toy chain within this new retail environment?” We also have a clean slate since the original KB Toys went BK a while back and we won’t have to deal with the bad press.
Richard needs to start somewhere and I get that. There is a huge hole in the toy industry which needs to be filled. Both stores competed well for different customers and that’s a good thing.
Those of you who believe there are major issues with e-commerce or Target/Walmart taking the business, you’re wrong. Toys are interactive and experiential by nature. You need a national chain to give the customer that experience. In addition, you also need to nurture the smaller toy companies as the “big guys” only focus on IRI data and not large toy selections. The hypothesis was proved this last holiday season as consumers were upset they couldn’t find the toys they wanted. And you can’t click a button on Amazon when you have a crying kid next to you begging for a toy.
The idea of experiential toy retail is a tricky one. On one hand, I have only fond memories of TRU from childhood. As a parent, however, the thought of bringing my son to such a place is daunting at best.
If TRU can find a way to deliver an experience that inspires the same feeling in children AND successfully moves merchandise AND isn’t a nightmare from a parent’s perspective, they have enough brand equity to succeed. Millennial parents know that we’re not necessarily guaranteed a spot in the same socio-economic rung as our parents. We want to see our kids grow up not just happy, but well-equipped to form meaningful relationships and have a career that allows them to take care of themselves and their family.
My suggestion to TRU is that they look not necessarily to Walmart and Target for cues here, but to epic educational playspaces like Badlands Playspace in the DC-area, which is now (appropriately) occupies the home of some now-abandoned big box store in a local strip mall. Or, perhaps, if retail it must be, then I would have a look at the American Girl Store in NYC. The disappearance of McDonald’s ball pits should be enough to tell us that a play area itself won’t necessarily be a wise use of space.