More details have emerged this week about the newly-revived Toys R Us retail operation over in the US – suffice to say the approach is certainly an ‘interesting’ one. Full marks for adopting such a bold strategy, but I suspect it’s going to split the toy community right down the middle. I read a couple of initial articles about the new set-up and then – delving further into the detail – realised that these stories had completely missed the crucial point. Essentially, the new stores won’t actually make any money selling toys: TRU’s income stream will be derived from manufacturers paying for retail space and services, with vendors keeping 100% of sales revenue. So, basically, Toys R Us could now be construed as a glorified landlord – or even the physical embodiment of a product catalogue. WTF? (Assuming I can use that acronym and that MGA hasn’t already trademarked it for a new range…Wow Terrific Friends or something).
TRU has tied up with an experiential retail company called b8ta for the venture, whose CEO apparently envisions the future of retail looking a lot like an Apple Store. Gone are the 40,000 sq ft stores piled high with toys; in their place will be 5,000 sq ft shops with stations (i.e. trestle tables) where – and I quote – “kids can interact with the latest crazes, under the watchful eye of sensors and trained product specialists analysing customer interactions.” In an age where you can’t even take a photo with someone else’s child inadvertently in the background without the risk of ending up on a police database, this pseudo ‘Big Brother’ approach seems to me to be a huge gamble. Will customers have to sign a disclaimer on entering the store, giving their permission for their children to be watched (spied on) or filmed? Ultimately, is this really delivering the wonder, magic and mystery of a great toy shop, or is it all perhaps a little bit clinical and soulless?
Then, as someone pointed out when I posted the story on my LinkedIn feed, there are the practicalities of the whole set-up to take into consideration: as vendors will take all the sales revenue, who sets the retail price? Does the supplier put all the goods on sale at suggested retail price (and is that realistically going to work)? Who covers shrinkage? What about returns? Who covers the freight in and out? Who decides on the marketing/advertising and who pays for it? Who decides on space allocation and product selection? It seems like a potential minefield with an awful lot of exposure to the vendor and very little to TRU.
Playing devil’s advocate, I guess there is a chance it may appeal to some of the more tech-oriented toy companies. However, is there not a risk that parents will just treat it as an upmarket play centre, a place to amuse the kids for half an hour – will the format genuinely generate the volume of sales that toy suppliers would be anticipating? Or am I completely misreading this and we’re actually looking at the future of toy retail here (*shudders*)?
Three sets of financial results this week – B&M, Hasbro and Mattel – have illustrated that despite the challenging retail environment, business is definitely there if you have the right brands and operational strategies. B&M’s UK revenue rose by 13.8% in the last quarter, with like-for-like growth of 3.9%. The retailer, which has opened 12 new UK stores in the last quarter, has also announced plans to bring 45 new stores to the high street by December. Meanwhile, Hasbro’s global net revenue for Q2 grew by 9% to $985m, with franchise brands such as Magic the Gathering, Monopoly and Play-Doh all performing well, in addition to the relaunch of Power Rangers. Mattel’s Q2 growth was more modest – up 2.3% to $860 – but the company has already exceeded its $650 million cost-cutting target for 2019, and CEO Ynon Kreiz confirmed that “we’re out of the Toys R Us impact zone.” I’m glad people are finally putting it behind them – it certainly puts less pressure on suppliers if the new TRU model doesn’t prove to be a winner.
Elsewhere this week, toy industry stalwart David Allan has been appointed as managing director of Marbel, a wholly-owned subsidiary of Hape International. David has been in the toy industry for as long as I can remember, having been born into a toy trade family (his mum was legendary toy industry PR Dawn Allan). David has been at the helm of DKL Marketing for the past 12 years and has admitted that he’ll be sad to leave, but it’s undoubtedly a great opportunity for him and we wish him all the best in his new role. Changes have already been hinted at (a rebranding is on the cards), so we’ll keep you abreast of further developments as soon as they can be announced.
News has also just broken that Mothercare has started talks with third parties about a sale or franchising agreement for its British shops. It will be interesting to see if there are any takers.
I also gather that the Giochi Preziosi acquisition of Famosa – which we first reported at the end of May – has now been finalised. A bold move by GP which will no doubt strengthen its business in Spain, as well as its overall portfolio.
Finally, my annual plug for toy trade football aficionados to join the Toy World Fantasy Football League. We had a record number of players last year, and a lot of our regulars have already signed on for this year’s competition. So if you would like to join the Toy World Masters league, it is completely free to enter and you could become a God / Goddess amongst men / women if you succeed in wrestling the crown from Creative Toys’ Hugh Evans. You can sign up to play the game here, and the code to join our mini-league is e3jmi8. Everyone is welcome, even Man City fans (I have forgiven you for the Cup Final).