Toys R Us Executives Eye A Variety of Business Models While Toy Makers (Minus Funko) Remain Skeptical

The executive team behind the resurrected version of Toys ‘R’ Us plans to use a variety of business models to establish a global presence for the toy retailer, but first it needs to solidify its U.S. base.

That’s according to Richard Barry, president and chief executive of Tru Kids Brands, the Parsippany, New Jersey-based company that owns the rights to the Toys ‘R’ Us and Babies ‘R’ Us retailing brands, along with Geoffrey, the famous Toys ‘R’ Us giraffe mascot.

Tru Kids, which is backed by a group of Toys ‘R’ Us’ secured lenders, recently announced it was taking an “omni channel retail experience” approach as it merges the Toys ‘R’ Us brand with the roughly 20 consumer toy and baby brands it owns.

Barry said, as part of that approach, the company is focused on servicing the customer through all channels, including physical, digital and mobile shopping experiences.

Screenshot 2019-02-21 06.35.37.png
Toys R Us Booth at the 2019 New York Toy Fair

“While I can’t say today what that exact strategy is, we do know that we will have an omni-channel approach that is tech immersive and experiential with a smaller footprint” than Toys ‘R’ Us had when it filed for bankruptcy in late 2017, he said.

The company’s No. 1 priority is to solidify the U.S. retail strategy for Toys ‘R’ Us and Babies ‘R’ Us,” said Barry, who joined Toys ‘R’ Us at the age of 18 and was the retailer’s global chief merchandising officer before its bankruptcy.

Tru Kids’ Geoffrey’s Toy Box wholesale division has a booth at Toy Fair this year, but most of its branded products aren’t well-known by most consumers. Barry told New York Business Journal Saturday, the first day of Toy Fair, that his company was looking to add bigger product brands to its arsenal.

“We have been talking with toy vendors and have a team at Toy Fair meeting with the top toy companies to discuss plans for the U.S. strategy and how we can support our international partners,” Barry said by email.

In fall, U.S. grocery retailer Kroger said it teamed with the company to bring Geoffrey’s Toy Box exclusive brands to almost 600 stores across the country for the 2018 holiday season. Noting that the team up was a ‘great success’, it still wasn’t quite the nostalgic punch that fans of Toys R Us were hoping for. We wanted stores. However, according to Barry, the Geoffrey’s Toy Box team is looking at Kroger for a potential 2019 partnership during the holiday season.

The Geoffrey’s Toy Box team also is talking to retailers around the world to place product in stores, including Toys ‘R’ Us and Babies ‘R’ Us stores outside the U.S., he added.

Tru Kids in its Feb. 11 announcement said it would be opening 70 stores this year in Asia, India and Europe and develop new e-commerce platforms in several key markets.

Because remember kids, Toys R Us is alive and well in both China and Japan.

Asked whether the company’s ultimate goal in the U.S. is to operate its own independent Toys ‘R’ Us and Babies ‘R’ Us stores, like it’s doing in other markets, Barry said only that the company is “entertaining a variety of business models.”

“[Our] ultimate mission is to spread the joy of Toys ‘R’ Us and Babies ‘R’ Us around the world through a variety of executions,” he said.

“[Tru Kids is] focused on bringing Toys ‘R’ Us and Babies ‘R’ Us back in a completely new and reimagined way in the U.S. in 2019,” he added.

As for which mistakes he believed the old Toys ‘R’ Us made that the new team is working to avoid, Barry pointed to the customer experience.

“Retail globally continues to go through a massive transformation,” he said. “The company faced what many retailers are dealing with today. While we were servicing hundreds of millions in debt, we weren’t in a position to invest in evolving the business to meet the needs of the consumer.

“What happened with the liquidation was extremely regrettable, but this brand does not deserve to go away in the United States,” Barry added. “We are starting with a clean slate of canvas. We are going to put the customer first.”

Kim Mosley, president of the American Specialty Toy Retailing Association (ASTRA), isn’t counting out the new version of Toys ‘R’ Us.

“Many in the toy industry are watching as the new version of Toys ‘R’ Us is developed,” she said. “It is interesting that the new Toys ‘R’ Us model looks similar to what ASTRA members have been doing for years – placing an emphasis on the customer experience.”

And that’s helped those dealers survive and thrive, she noted.

However, one cannot fully  toy maker executives for viewing reports of Toys ‘R’ Us potentially re-opening up U.S. retail stores with heavy skepticism — if not utter disdain at the prospect of trusting company bigwigs at the retailer again.

The bankruptcy of Toys ‘R’ Us in the fall of 2017 — and subsequent closing of hundreds of U.S. retail stores months later — was a punch to the face of toy companies that relied upon the chain as a key outlet for their latest toys. After years of mismanagement following a disastrous leveraged buyout in 2005, toy makers such as Hasbro and Mattel had to endure a painful 2018. It was headlined by terrible sales pressure and weak stock prices as Toys ‘R’ Us liquidated inventory and shuttered some 700 U.S. locations by the spring.

In turn, the lack of a national toy chain instantly put more buying power into the hands of discount chains such as Walmart and Target and of course, e-commerce beast Amazon.

Long-time Hasbro chief Goldner said a strong slate of children’s movies and related toys this year — namely “Frozen 2” and “Star Wars 9” — will help get the company back on track following 2018’s challenges. Goldner expects Hasbro to return to mid-single digit revenue growth in 2019 and operating margin expansion.

“By 2020 if we can grow like we say we can, we will look like we did in 2017,” he said. Or in other words, pre-Toys ‘R’ Us bankruptcy.

While Hasbro CEO Brian Goldner is a little more muted, hoping to return to their 2017 growth and business model by 2020, Funko CEO Brian Mariotti was a little more optimistic and strategic in the Pop-Monster’s 2019 business plan.

“I think Toys ‘R’ Us is serious about opening up new retail stores — we have meetings scheduled with them for the toy fair,” Funko CEO Brian Mariotti told Yahoo Finance. “We will be great partners, we will listen to what they have to say and evaluate the opportunity. We wish them nothing but the best. Unlike most toy companies, Funko has no one partner that accounts for more than 10% of its annual sales. That diversity has come in handy amid numerous retailers closing up stores.”

The impact of Toys ‘R’ Us’s bust has been mild for Funko, a toy maker known for its collectible pop culture dolls, as they have ensured that a variety of stores have specific Pop exclusives, such as the Mr. Rogers Pop only availble at Barnes and Noble, or the Sailor Moon royal family three pack that was a Hot Topic exclusive back in 2017.

“We are never going to be reliant on one retail partner,” Mariotti said.

While Mattel and Hasbro have warned investors that the lack of Toys R Us and other industry factors could result in a flat performance in 2019, Mariotti is confident about the coming year.

“I think 2019 is at an A+ level on content,” he said. “I think we are going to have an insane year. I wouldn’t be surprised if, when we give our guidance, it is not extremely optimistic.”

 

SOURCE: New York Business Journal

SOURCE: Yahoo Finance

SOURCE: CNBC

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One comment

  1. These guys are morons. They are trying so hard to hold on to their generic toy brands like Journey Girls, etc. They need to give that up and figure out how to get back to retail

    Like

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