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The best laid plans…it’s the Friday Blog!

Published on: February 2nd, 2018

I had a cunning plan for this week’s Blog, which worked very well…in theory. Knowing I had a packed schedule and would be pushed for time, I wrote a perfectly serviceable piece before flying to Nuremberg, with the caveat that I would be able to add a line or two if I picked up anything interesting over the first couple of days. What could possibly go wrong? The best laid plans and all that…

I awoke on Thursday morning to a story from Sky News which brought the ongoing Toys R Us saga back to headline news – not something that many people foresaw happening quite this quickly. The article quoted sources suggesting that advisers at Alvarez & Marsal and Lazard, which are overseeing the retailer’s bankruptcy protection process in the US, have sounded out potential buyers for the UK operations in recent days. The report went on to suggest that it was looking to seal a sale “within weeks.” Within hours I received a flood of emails, texts and phone calls from UK suppliers asking if I knew anything concrete, which at this stage I still don’t.

Sky was the source that broke successive TRU stories accurately before Christmas, so I would be reluctant to dismiss it out of hand. I am genuinely not sure who may or may not have been sounded out; I suspect it would be highly unlikely that any existing toy retailers would realistically be in the frame. The name of retail restructuring specialist Hilco has cropped up in a couple of conversations, and one person even suggested a management buyout backed by a VC would be a potential option. What the story has done is to add an additional layer of uncertainty and complexity into an already fragile situation. I think everyone – and I am sure this would include the TRU team – would appreciate clarity as quickly as possible. What happens from here is anyone’s guess, but hopefully the situation will be resolved fairly swiftly.

There had already been two other TRU stories of note earlier in the week: the first concentrated on the fact that it declined to release its festive sales numbers for the first time in over a decade. However, the local New Jersey paper was quickly on the case, reporting on a meeting held at the retailer’s HQ at which employees were allegedly told that US holiday sales were down by 9%, with online sales declining by 20%, missing analysts estimates by a considerable margin. The retailer also failed to meet the minimum earnings threshold required for executives to collect the $14 million in bonuses authorized by the bankruptcy judge. I have yet to meet a single person who feels that the bonus request was anything other than an error of judgement, both from a PR and partnership perspective, so maybe justice was served in the end.

I also thought it was interesting that TRU’s American operation has hired not one but two bankruptcy consultants – essentially, so that they would compete against each other. The task of clearing out store merchandise, overseeing store-level employees and managers and coming up with ways to transition customers to remaining stores and online shopping is being split between Hilco and Tiger Capital Group, with the aim of “fostering competition” in the liquidation process. Remuneration due to both companies includes both “base and incentive fees, based on overall performance.” In fairness, this may turn out to be a smart move – I know plenty of suppliers who have suggested that some previous retail bankruptcy arrangements have been a little too ‘cosy’ for their liking.

As anticipated, I have picked up a couple of titbits around the show; Fiona Murray-Young has joined Dutch retailer Intertoy as head of buying, so it’s nice to see her back. I also heard that Disney has laid off around 100 people from its European licensing team, including several experienced people who were very well thought of by licensees. I hope that they manage to find new opportunities in the licensing realm soon.

Going back to my original pre-prepared piece, it was encouraging to see a good level of media coverage during Toy Fair, including the return of BBC Breakfast and the legendary Steph – I do appreciate a journalist who throws themselves into their subject matter, and fair play to Steph, she’s never shy at having a go. With plenty of National press coverage, focused not just on the large companies but a healthy spread of exhibitors, it was a good media week for the toy industry.

Which made what followed at the end of last week all the more disappointing. Within a matter of days of Toy Fair finishing, the media was trotting out a series of ‘scare’ stories focused on the toy trade, which as usual only told half the story. First was a BBC story about Amazon removing tubs of magnetic putty from sale after Northamptonshire Trading Standards barred the offending item from sale, having discovered it on a market stall. Note the three main offenders here were a) one un-branded supplier, b) a market stall and c) Amazon Marketplace. Let’s hope that the story hasn’t confused customers into thinking there is a problem with magnetic putty in general. Hundreds of thousands of pots were sold last year with no issues; it is very important not to confuse legitimate suppliers and retailers with these dodgy third-part Amazon sellers – indeed, this may provide the trade with a good opportunity to explain why it is important to buy from reputable suppliers and retailers rather than at market stalls or via Amazon marketplace. I am led to believe that Amazon is trying to clean up its act, but this latest incident shows just how far it has to go.

This was followed by an even more bizarre story covered by the BBC, highlighting the fact that old second-hand toys -particularly those from the 70s and 80s – don’t meet current safety guidelines. Really, you do surprise me! Again, hopefully an opportunity for the BTHA and toy retailers to emphasise the good work which the industry does to ensure kids are kept safe. One just has to hope that people take the time to read beyond the clickbait headlines, as the words ‘toys’, ‘scientists’ and ‘harm children’ don’t look good when they all appear in a headline together.

I just wonder whether the media’s sudden obsession with counterfeit toys was sparked by including the phrase prominently in the headline accompanying the story put out at Toy Fair about the UK market being down in 2017. I am sure that was never the intention, but it may just be that the media curiosity has been piqued when I’m not sure it needed to be.

Not that the counterfeit toy issue isn’t real – as you can see by this photo showing a couple of fakes spotted by one of our eagle-eyed readers on a recent trip to Europe. We do need to stamp this nonsense out, but I just hope the media finds something else to get irate about soon and leaves us to do what we need to do without unduly worrying consumers.

 

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