Toys “R” Us – Is The Brand Really Dead?
Toys “R” Us stores might be re-opening just in time for the 2021 holiday shopping season. Just when you thought you’d seen the last of Geoffrey the Giraffe, Toys “R” Us has reared its head yet again.
Earlier in March of 2021, Tru Kids (the parent company of Toys “R” Us) sold a controlling stake in their company to WHP Global. One of the biggest developments from the deal was the announcement that WHP Global plans to reopen some physical Toys “R” Us stores this year.
What Happened to Toys “R” Us?
As you might recall, in 2017 Toys “R” Us filed for bankruptcy. At the time, it was the third largest retail bankruptcy in history. The bankruptcy failed to save the toy retail giant and the company was forced to liquidate its assets the following year.
Toys “R” Us was the largest toy retail store in America. So, what happened? In the simplest of terms, consumer purchasing habits shifted and caught Toys “R” Us off-guard. The company wasn’t too big to fail, and they fell hard.
Competitors leapt at the chance to fill the gap left by its absence. These competitors didn’t dare open new brick and mortar stores to sell toys. Instead, retailers boosted their online presence with e-commerce.
Toys “R” Us struggled to make the transition from physical stores to the online retail space. Their strategy was to try and own the overall topic platform of toys online. By attempting to dominate the online search for toys, the company failed to sell actual toys.
Toys “R” Us didn’t make direct e-commerce with consumers. Instead, they advertised and displayed products for other companies like Target, Walmart and Amazon. In hindsight, it must seem pretty ridiculous to use your online platform to send consumers directly to your competition, but that’s exactly what Toys “R” Us did.
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Are Kids Just Not Into Toys Anymore?
There’s no problem with the retail sale of toys. Both children and adults are still buying lots of toys. The segment has continuously thrived since brick and mortar Toys “R” Us stores closed down.
In fact, the COVID-19 pandemic has spurred toy sales because parents are stuck at home with stir crazy children who need stimulation. Mandatory quarantines are a godsend for toy retailers. According to market data from NPD Group, the sale of toys rose by 16% in 2020. People just aren’t going to the mall to buy them.
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In another ill-timed pivot, Toys “R” Us tried to resuscitate their physical presence in 2019. Tru Kids took over the Toys “R” Us brand and all of its intellectual property. They planned to open 70 stores.
These would be smaller versions of Toys “R” Us with toy demonstrations and other engagement features in the location. Tru Kids planned to rent out space inside the stores to independent toy retailers. So, revenue didn’t come from physical products. It came from rentals.
However, COVID-19 put a halt to Tru Kids’ progress, and they closed that operation completely in the beginning of 2020. The fact that most of these pop-up style stores were slated to debut across countries in Asia might have been a factor. Sounds like yet another case of bad luck.
How is Toys “R” Us Making a Comeback?
Toys “R” Us’ parent company Tru Kids certainly wasn’t out for the count after the initial liquidation and failed reboot. Toys “R” Us, under the guise of Tru Kids, still raked in a couple of billion dollars a year through international sales and their bizarre online strategy of platforming for other retailers.
They operate about 900 stores worldwide despite shuttering the big box Toys “R” Us megastores in the USA and UK. Tru Kids has been keeping Geoffrey the Giraffe on life support in hopes that the economic climate might change again in their favor.
Consumers certainly did rally around the brand when the news broke about more than 200 stores closing their doors. It wasn’t enough to save Toys “R” Us. The company needed to downsize and shift gears.
It might seem like Toys “R” Us has been changing hands faster than a street hustling magician, but things aren’t so different behind closed doors. It might seem like the company is getting bounced around like a hot potato, but it’s a tight circle at the top.
In the early years after Toys “R” Us’ bankruptcy, Tru Kids took on some key executives from Toys “R” Us. Also, Yehuda Shmidman, who is the current CEO of WHP Global, was the vice chairman of Tru Kids. He advised Tru Kids on their global brand strategy and now has completely pulled Tru Kids and the Toys R Us brand under WHP Global’s wing.
In an interview with CNBC, Shmidman commented, “We’re in the brand business, and Toys “R” Us is the single most credible, trusted and beloved toy brand in the world. We’re coming off a year where toys are just on fire. … And for Toys “R” Us, the U.S. is really a blank canvas.”
“Our investment in Toys “R” Us reflects our belief and passion for the brand…This is a natural fit for WHP, as we can leverage our global network and digital platform to help grow Toys “R” Us and Babies “R” Us around the world.”
The strategy for new Toys R Us stores is similar to what Tru Kids wanted to do back in 2019. Except now, there will be a mix of megastores, pop-ups, and special sections in airports.
Shmidman was quick to point out that shopping malls are closing all over the country and Toys “R” Us would be wise to avoid them like a plague zone. Instead, WHP Global plans to scout out locations where there is lots of foot traffic for browsing and places where consumers are likely to still spend money on toys in the real world.
The true test will come when these stores actually open their doors to the public. There hasn’t been any updates on where and exactly when this will happen, but eager toy shoppers had better get their wallets ready if they want to see their favorite toy store stay alive…again.
