TRU KIDS INC: THE PHOENIX FROM THE TOYS R US ASHES?
The return of a new ‘version’ of Toys R Us is hardly surprising. Bearing in mind the latent affection consumers clearly have for the brand, the established social media following, the tooling and ready to go own brand products and the very similiar leadership still in place increasingly make this return seem like it was always inevitable.
The major challenges for Toys R Us prior to the bankruptcy were well known – massive warehouse style stores (with the hefty rents that go with that kind of space) which needed to be filled with inventory in a category which is very seasonal and where sales are dominated by the last 2-3 months of the year. The failure to keep pace with the digital revolution. The large workforce to staff the big warehouse stores etc. which created orgainsational and store by store inertia to change. These operating difficulties have largely been swept aside by the bankruptcy (albeit with significant collateral damage).
So now ‘TRU Kids Inc’ emerges free of large warehouse store leases, unencumbered by a huge workforce and with the flexibility to relaunch and reposition this evolution of TRU for the needs of today and tomorrow versus the format of the 1980’s and 1990’s.
The challenge is the significant bad feeling caused by the manner of the way the company/those behind the company treated their suppliers. Many toy companies lost $millions, they also certainly lost faith and belief in the ethos of the company as it was. While we can ask questions about the morality of what happened before, being cycnical, the hard reality is that the toy industry really needs a national level toy specialist retailer in the USA – that is the bottom line. Specialist retailers give us more merchandising opportunities, raise awareness, stock a much broader range, take more risk on stock as they need to fill a defined store space unlike generalist retailers who can switch space to other product categories.
The bottom line here is will toy companies swallow the bitter pill of supplying this new entity to support the company with arguably the best chance of re-becoming a national level toy specialist in the USA?
Can you run a successful toy chain without the hottest toy products? Possibly you can, but it will make things harder. The reality is that any toy specialist chain needs to have both the hottest products as well as a broad range. TRU Kids Inc may be able to persuade enough suppliers to come on board to build a wide range, and they can certainly expect to pad out their offering with own brand products, but the challenge is will they get enough of the big players on board to have enough hot product to be relevant? A store full of ‘OK’ but not ‘HOT’ toys is not as likely to draw traffic into store – kids will know they can get the really cool stuff elsewhere.
There are a myriad of other factors to consider also – including where will the stores be, what will the format be, how many will they get open before Q4 2019 , how will they make their digital offering better/more keeping with the times than before, what will the trading terms need to be/how will they finance that as it appears unlikley that suppliers will want to give them much by way of credit etc.
In the end, whether this venture succeeds will depend to a fair degree on the ability of the new venture (featuring some of the old team) to win friends and influence people in their favor after all that has gone before. Business can be very cynical – retail is always a cut throat hardball sector, and while the TRU bankruptcy created a massive seismic wave of controversy, businesses want to sell more products. A phoenix from the flames is (eventually) likely to get the backing of suppliers, even if it comes with a begrudging and risk averse approach.
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Some of our brand and product management clients asked us to help them create YouTube content, so we recently launched a new strategic partnership creating content for toy companies. To find out more, click here: http://www.kidsbrandinsight.com/toy-industry-veterans-launch-new-marketing-content-production-service-for-toy-companies/