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Industry perplexed by Target tie-up with Toys R Us

Published on: October 10th, 2019

Reaction to the deal has been decidedly mixed.

It was announced yesterday that Tru Kids Brands has teamed up with Target to relaunch Toysrus.com. The site, which launched earlier this week, features product reviews and videos, while from a transactional perspective, it directs browsers to a buy button at Target.com to complete the purchase. Both Target and Tru Kids declined to share details of the financial terms of the arrangement.

While some analysts have suggested that the move could turn out to be a positive development for Target’s toy business, there have been questions as to why Toys R Us’ parent company has outsourced e-commerce to a third party. One theory suggests that the move legitimises the new operation and could pacify toy companies, some of whom may have otherwise been reluctant to give them credit, or even supply them with product until previous bills were settled.

While MGA’s Isaac Larian described it as a “great move by Target”, others seem slightly perplexed by the arrangement, and specifically the benefits which each party will derive from the partnership. Several people pointed to the fact that history is repeating itself: Amazon ran TRU’s initial ecommerce platform, and of course TRU is currently being run by some of the same management team from that time. Some have questioned whether we should we expect different results this time around, or indeed whether this was the best option for TRU.

One comment on Toy World’s LinkedIn feed said: “Great job by Target, but I think Toys R Us has really made a mistake by outsourcing every single aspect of this. The Toys R Us site is now just one big affiliate programme for Target. What Toys R Us should have done is partnered with the big toy companies and had them drop ship; that way they could get up and running quickly with their own ecommerce store. Then as revenue came in, build out their own fulfilment operation. Countless ecommerce companies have been able to build that way. It’s like when Target had Amazon power their ecommerce operation way back when – short sighted.”

Some have questioned whether Target needs the “hassle” or whether this is more of a PR exercise than a money-making venture, while others have suggested the partnership provides a buffer against the inexorable rise of Amazon. One person commented: “Target has been trying to reinvent themselves for a while. I would imagine this is more of a preventative move, which they hope will safeguard them from the challenge of competing with Amazon.”

Other broadly positive comments included: “Americans do love and will back a Phoenix, so this move may well pay huge dividends for Target – being the retailer that helps them to help itself” and “I think Target see this as another route to market, as online users get redirected to their website at the purchasing stage. Add the potential PR bonus of being seen to help rescue an iconic brand and they probably see it as a low risk strategy which stands a better chance of success than not.”

However, others were sceptical about the chances of success for the partnership: “Other than a ton of PR, I agree this is a head scratcher. There will be data to collect, but the TRU assortment will be limited, so data won’t be any more valuable or offer new insights from what Target already collects. Unless Target wants to take a “marketplace” strategy (like Amazon & Walmart), I’m not sure what -if any – benefit this arrangement brings to Target.”

While some can see potential advantages for Target, there is even more confusion over the benefits that TRU will derive, summed up neatly by a quote from a USA Today report: “If Tru Brands was truly trying to rebuild a sustainable toys business, they would never want to outsource their e-commerce to a third party and certainly not to a rival. Sadly this is probably a sign that the current Tru Kids efforts are a shallow effort to monetize a brand they own, rather than an attempt to build a serious toy competitor.”

One poster on our LinkedIn feed was even more scathing: “This whole news cycle is clever spin by the TRU principals, trying to leverage whatever value they can from the damaged brand mark of Toys R Us, a retailer that was a case-study of incompetence online. ‘Toys R Us rises from the dead’, ‘Toys R Us enters an affiliate marketing model with Target!’ These clickbait headlines are all empty calories, tailor-made for pick-up by ‘Business Insiders’ and ‘Linkedin Editors’ who thrive on such populist nonsense, without any consideration of the realities. As a business model, it’s DOA. Two ‘mall-based’ retail locations? Target as the merchant of record on internet sales? How does anything in this spin get consumers en masse into these two retail stores, or get consumers to NOT first shop on Amazon (or Target.com directly) during the holiday season?”

As ever, time will tell as to whether the partnership will prove successful for either or both parties, or whether it ultimately ends up as a potential miscalculation in the return of the iconic TRU brand to the US market.

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