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The ‘f’ word…it’s the Friday Blog!

Published on: March 23rd, 2018

Much has been written and said in the media about the demise of Toys R Us. Much of it has been complete and utter drivel. TRU found itself in a unique position, its problems based on historic, unsustainable levels of leveraged debt. It turned over roughly $11b last year, as it did the year before and the year before that. It went down because of long-term economic mis-management by its owners – that is the plain and simple truth.

For quite a while now there have been dark mutterings about some of the things that have been going on behind closed doors, especially within the US TRU operation. Gradually, more information is making it into the public domain, and some of it is pretty incendiary. If you’re not suffering from Toys R Us fatigue and want to read an article that pulls back the curtain on the murky side of the Toys R Us situation, this piece by James Zahn – The Rock Father – is a great place to start.

James has written other articles about the complete unsuitability of Dave Brandon for the CEO’s role, and he also has a very interesting theory about President Trump’s silence on the whole Toys R Us situation. If you didn’t know just how much of a hotbed of intrigue the toy industry can be, these pieces are essential reading.

US toy suppliers are also starting to break their code of silence, as it looks increasingly unlikely that they will be paid for the goods they have shipped. The CEO of Basic Fun even went so far as to use the ‘f’ word – fraud, that is (although I’m sure a lot of other people are using other ‘f’ words when they talk about TRU).

The whole saga has inevitably had a major impact on the prevailing mood of the global toy community, and while I would not want to underplay the significance of what has happened or make light of the challenges which lie ahead, I also think that it’s important to retain a sense of perspective. While there is an air of uncertainty, some things we do know; as US Toy Association president Stephen Pasierb says: “The birth rate will be unaffected, kids will celebrate birthdays, Christmas is still on the calendar.” History tells us that the people and companies whose main response so far has been to hide under a desk – metaphorically or literally – are not those who are likely to come out of this in the best shape.

That applies to retailers just as much as suppliers. There are some intriguing developments stateside – will KB Toys return? Will Isaac Larian manage to crowd fund $800m to buy TRU Canada and some US stores? – but I want to focus on the UK market. Some of our key retailers are very much applying the ‘carpe diem’ motto; The Entertainer is about to unveil a new-look to its flagship store at London Westfield, in which it has invested a whopping £700,000. I’m getting an exclusive tour before it opens to the public next Monday and I genuinely can’t wait to see what they’ve done. Other retailers are upping their game too; Smyths is making big investments, while several people have suggested that ‘specialist mini-chains’ such as Toy Barnhaus, Kids Stuff, Toytown, The Messenger Group and others are in a great position to expand further.

Despite what certain ‘experts’ may think, bricks and mortar retailing is far from dead. If you believe that most of TRU’s turnover is automatically going to flow online, it might be worth remembering that with the retailer’s demise, Amazon is in the process of losing one of its best showrooms (or in the case of the US, its main showroom). A massive opportunity is up for grabs, and many retailers will step up and emerge far stronger from this process.

Which makes it all the more disappointing to hear from suppliers that certain major retailers are dragging their heels over selections and commitment this year. Some may still be planning how best to take advantage of the TRU situation, while others may have mitigating circumstances – Argos / Sainsburys had a mid-week meeting to learn about the new internal structure and, presumably, who will stay on to be part of it. However, as much as we need suppliers to be bold and carry on doing what has made them successful, that can only happen when they have clarity and visibility on selections. It is a virtuous / vicious circle; right now, the industry needs to work together, keep channels of communication open and recognise the mutual opportunities that are there for the taking.

Yes, the toy market is in the process of recalibration, but according to NPD, February sales were only 1% down in value terms, and at least we haven’t got a lunatic president about to impose tariffs on Chinese imports. If Trump goes ahead with that move, it will surely have just as great an impact as on the US market as the loss of TRU. There is a great article from NPD in our forthcoming April issue, referencing the disappearance of Woolworths and how long it took the UK market to recover. No spoilers, but it was not that long, and it did all come back. I’ve also seen a good article from NPD in the US this week (read it here), which uses data to illustrate that the impact of TRU’s disappearance is likely to be far less than some have suggested.

The global toy market may or may not grow this year, but nothing is impossible, providing we – as a community – don’t make it a self-fulfilling prophesy. We need to turn the corner and bring the confidence back – and the sooner we do that the better.

And if you think that all of this is a very long-winded way of saying that maybe some people should think about cheering the ‘f’ up…you might think that, I couldn’t possibly comment.

Anyway, finally, there’s just time to mention that David Martin has parted company with Posh Paws, while Sarah Strangeways is no longer with Beales. If Alanis Morisette is thinking of updating her song ‘Ironic’, the Beales’ saga may be a contender for a verse in the new version.

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