A Toy Story: As Toys “R” Us closes, two brands rise from the ashes and one major toy store thrives

A Toy Story:  As Toys “R” Us closes, two brands rise from the ashes and one major toy store thrives

June 10, 2018

When Toys “R” Us announced plans to close all 735 of its U.S. stores back in March, it wasn’t exactly a surprise as sales and marketplace shares were lost to online companies like Amazon. This past Friday the harsh reality hit home as Geoffrey the Giraffe said his final goodbyes and like Lionel Playworld / Kiddie City and KB Toys before them, Toys “R” Us closed forever affecting close to 30,000 employees.

But as one major toy brand rides off into the sunset, another is rising from the ashes.

Strategic Marks, which owns the KB Toys name and brand, announced that it plans to open 1,000 pop-up KB Toys shops this year for Black Friday and the holiday season, according to CNNMoney. The decision came three months ago as toy retailer Toys “R” Us announced that it was calling it quits after 70 years.

“My assumption is that there’s about half a billion dollars worth of toys that have been produced for Toys “R” Us with no place to go,” Strategic Marks president Ellia Kassoff told CNNMoney. “That’s a big, big void that we’re hoping to fill up.”

Kassoff said he’s working on deals with Hasbro, Mattel and 200 smaller toy makers “that have inventory but no place to sell it,” according to CNN.

The pop-up stores will end after the holiday season unless they perform well and report high sales numbers.

Kassoff said he’s drawn influence from stores like Spencer Spirit Holdings Inc., Go! Retail Group, and Party City Holdco Inc., which often open pop-up stores around the Halloween season and fill their stores with Halloween gear, toys and props.

“We’re talking to companies that know how to do it, they have a methodology, they’re used to rolling out stuff real quickly,” he said.

Kassoff told the New York Post that he originally wanted to relaunch KB Toys online. However, Toys ‘R’ Us’ decision to close its doors inspired him to follow the pop-up idea.

KB Toys began as a family-owned toy business in 1922, according to CBS. It soon ballooned into one of the country’s biggest toy retailers. The company filed for bankruptcy in 2004. Prentice Capital Management purchased the company before it went bankrupt again in 2008.

Kassoff hopes this move will reverse the fortune of all toy retailers.

“We’re going to save the toy industry,” he wrote in a LinkedIn post.

But KB Toys isn’t the only retail toy brand that has risen from the ashes.

F.A.O. Schwarz, known as the oldest toy store in America, having first opened its doors back in 1862 is making a comeback. 

Famous for its store’s floor piano, human toy soldiers and intricate toy trains, the retailer was acquired by Toys “R” Us in 2009, but was sold in October 2016 to ThreeSixty Group, a company that designs and sells consumer products including toys and home goods. The store’s flagship Fifth Avenue location closed in 2015 due to rising rents, marking the end of an era for New Yorkers and toy lovers everywhere.

But the iconic toy retailer, which has already relaunched online at faoschwarz.com, has leased a 19,000-plus-square-foot store at 30 Rockefeller Plaza in midtown Manhattan. The new location is significantly smaller than the 61,000-square-foot space on 58th and Fifth Avenue F.A.O. Schwarz called home for 30 years. While further details have not been provided, the store is expected to open this fall, according to NBC.

The retailer will also be able to reach consumers from all over the world thanks to a new agreement with travel retail company Hudson Group to open a chain of F.A.O. Schwarz-branded airport shops in the U.S. and Canada, with the first store opening later this year.

Back in February, Lee Ching Yiu, Chairman and Chief Executive Officer of Kidsland International, said his company was excited about welcoming the iconic U.S. toy brand. “With customers looking for authentic brands and memorable encounters, we believe the brand will become a game changer in China’s toy industry,” he said.

In a tie-up with now-bankrupt department store company Bon-Ton over the holidays, FAO Schwarz brought back updated renditions of some of the best-loved items and some new favorites for the toy chest including its famous Piano Mat. But the company is putting most of its energy abroad. Last year the company inked a new deal to launch a webstore and expand its joint venture with longtime partner Fung Retailing in Asia. In 2016, the company opened 29 U.S. stores, including 27 outlet and express stores, and closed 16, while, internationally, it opened 73 stores and closed 17.

Thriving in the Retail Apocalypse

The gravitational pull of online shopping has decimated many iconic brick and mortar brands. Amazon’s toy sales grew about 12% last year, according to market research firm One Click Retail, while declining foot traffic has threatened to topple every time-honored kids company from American Girl to the once-invincible Lego.

In an era of smartphone shopping and same-day delivery, one decades-old toy chain has managed to weather the storm. And it’s a peculiar one.

In February, Build-A-Bear announced its fourth straight year of profitability. As retail giants like Claire’s, The Limited, and Payless shutter stores by the hundreds, the company has expanded its physical footprint by 12% over the last five years. And while Toys R’ Us closed its doors with $5 billion in debt, Build-A-Bear is debt-free. So what does Build-A-Bear have that Toys “R” Us didn’t?

Stuffing machines. In the middle of every Build-A-Bear store is a comically large aquarium, of sorts, for fuzzy animal innards. The “stuffer” is a crucial stop on an assembly line that lets kids turn limp animal skins into fully-formed toys. Existentially speaking, it’s also indicative of everything Build-A-Bear stands for.

Ask any retail expert how to woo shoppers in 2018, and they’ll probably say you need some sort of “experience.” Something that holds shoppers’ attention for longer than the time it takes to snake through a checkout line. Something special.

Build-A-Bear figured this out a long time ago. The “stuffer” is quaint, and cute, and ties together one of the most interactive shopping experiences out there. It starts when you walk in the door, and come face-to-face with dozens of plush animal species. You choose your favorite (Bear! Elephant! Rabbit! Pony!) from overflowing bins, and continue down row after row of accessories, customizing everything from body mass index to sunglass style to underwear fit to lightsaber color to wig texture to backpack design. Your creation can go home smelling like a donut, or cotton candy, or popcorn. It can have a heartbeat.

Build-A-Bear doesn’t bill itself as a toy store, or even a stuffed animal store. It’s in the business of selling memories.

“When you buy something at Build-A-Bear, especially if it’s going to a child, there’s an emotional attachment,” says Ben Row, a retail specialist at the analytics firm Bigtincan. “Every retailer needs to find that place.”

The thing about Build-A-Bear is that it isn’t just for kids. Whatever you’re into, and whatever your age, Build-A-Bear probably has a stuffed animal accessory for you. Love Harley’s? Motorcycle chaps. Chicest goth in high school? There’s a Hot Topic line that’s right up your alley. Pokemon, My Little Pony, and NFL-themed merchandise are sprinkled around the store — each tapping into a decades old, cross-generational subculture that helps rope in parents that grew up loving those brands.

“There’s definitely a nostalgia factor, especially for millennial parents,” says Reyne Rice, a global toy trend hunter and consultant. “They know some of the characters, they know the play pattern, and now they can share that experience with their child.”

Build-A-Bear’s sentimental pull is so strong that even people who don’t have kids are spending money there. The company, for its part, has learned to cater to a generation enamored by “promposals” and “gender reveal parties” with a dedicated line of merch for every instagramable life event (“I can’t BEAR to go to prom without you!” “Promoted to Big Brother!” “#1 Grad!”). Build-A-Bear wedding proposals are so popular, that when the company shared a video of one couple’s “beary special moment,” last year, dozens of people commented with tales of their own Build-A-Bear-inspired nuptials.

Retail has hit a unique, “multigenerational moment in time,” says Build-A-Bear CEO Sharon Price John, and it’s helped boost Build-A-Bear’s reputation across age groups. But the company has focused on immersive shopping since it opened up shop in 1997, she says. The rest of the market is finally playing catch up.

“We’ve been around for 20 years now, in a space where people have a reason to go to retail for something other than transacting,” she says. “Build-A-Bear was on the forefront of experiential retail. We created it, to some degree.”

Build-A-Bear isn’t immune from the forces that led to Toys “R” Us’ downfall. Earnings documents show that, like most shopping mall staples, the company’s revenue has ticked down in recent years. An increase in margins and licensing has raised the brand’s profits, though. At a time when the CEO of Bratz Dolls has to crowdfund to #SaveToysRUs, the fact that a product line with more similarities to a Beanie Baby than a Nintendo Switch is edging out its competition is certainly noteworthy.

John joined Build-A-Bear in 2013, taking over as CEO after founder Maxine Clark retired. Over the next several years, she led an aggressive turnaround strategy that shook up the leadership team, closed unprofitable stores, and improved the design of others. Last fall, Build-A-Bear launched a new website with customizable, immersive touches, like a “Bear Builder,” an online version of the “stuffer” and “Build-A-Party” for birthdays. At the end of last year, the company’s e-commerce sales were up about 3% compared to 2016.

With John at the reins, Build-A-Bear muddied the line between retail and entertainment, and where the company belongs on that Venn diagram. Over the last few years, Build-A-Bear workshops have popped up inside AMC Theaters, at vacation resorts in Jamaica and Turks and Caicos, and on Carnival Cruise ships. Build-A-Bear hasn’t abandoned malls, but the company is counting on new leases in kid-friendly tourist hotspots, both in the U.S. and internationally, to drive sales going forward.

“Anywhere families go to make memories, Build-A-Bear is a growing and relevant partner,” John says.

Location — or lack thereof — plays an important role in Toys “R” Us’ story, too. Through the ’80s and ’90s, the chain was an unrivaled destination for enthusiastic kids and their doting parents. But the company’s cavernous, warehouse-like storefronts aren’t the kind of places people stumble into while window shopping (“You’re either going to a Toys “R” Us or you’re not,” says Bigtincan’s Row). And it’s website didn’t exactly draw you in, either (For years, Row says, it was “like a grocery store catalog”).

As sales slid, customer complaints about store cleanliness and apathetic employees grew. After a 2000 partnership with Amazon ended less than five years later with each company suing the other, the toy chain never found a good e-commerce strategy to replace it. Faced with mounting competition from online retailers and discount stores like Walmart and Target, Toys R’ Us cut the number of products it carried, slashed the prices of those it kept, and tried to move merchandise off its shelves as quickly as possible.

In the end, there were several “murder weapons” that brought Toys “R” Us down, according to Richard Gottlieb, a consultant at Global Toy Experts. But the chain’s pivot to price over experience was the most toxic.

“They ended up doing away with the magic and joy that makes a toy store a great,” Gottlieb says. “They lost their love for toys.”

Sources: CNNMoney, Money Magazine, CBS News, NBC News, Retail Dive and Town & Country

 

When Toys “R” Us announced plans to close all 735 of its U.S. stores back in March, it wasn’t exactly a surprise as sales and marketplace shares were lost to online companies like Amazon. This past Friday the harsh reality hit home as Geoffrey the Giraffe said his final goodbyes and like Lionel Playworld / Kiddie City and KB Toys before them, Toys “R” Us closed forever affecting close to 30,000 employees.

But as one major toy brand rides off into the sunset, another is rising from the ashes.