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Thursday, Mar 28, 2024

Comeback for Toys R Us Name

By AMY STULICK Staff Reporter Toys R Us is coming back in a smaller, more immersive format this holiday season, a good sign for Valley companies in the toy business. The new concept is the result of a joint venture between Toys R Us parent company Tru Kids Brands and B8ta, a 2015 startup “software-powered experiential retailer.” The partners plan to open two retail stories in Paramus, N.J. and Houston by year end. B8ta, which received $40 million from investors, operates 17 branded flagship stores, including one in Santa Monica, aimed at helping consumers make a decision about a product in-store that they might not pay attention to online. That approach will figure highly in the new Toys R Us. “As a kid, my memory of Toys R Us was running up and down the aisles kicking balls and playing with the coolest toys,” said Phillip Raub, president of B8ta, in a statement. Raub also serves as interim co-chief executive for the partnership, along with Richard Barry, chief executive of Tru Kids. The company deferred to a press release on the Toys R Us website when contacted by the Business Journal; B8ta did not respond for comment. “As the retail landscape changes, so do consumer shopping habits. But what hasn’t changed is that kids want to touch everything and simply play. In partnership with Richard (Barry) and his team, we are excited to bring back Toys R Us in an immersive way, focused on creating a fun and engaging experience for kids — and adults, too,” added Raub in his statement. Chapter 11 legacy For Tru Kids, the choice to go smaller and immersive marks a contrast to the brand’s previous history. Toys R Us closed more than 800 stores – mostly big boxes – nationwide as part of a Chapter 11 bankruptcy plan last year, sending ripples throughout the toy industry. In January 2018, it was reported that Toys R Us owed a total of $7.5 billion to major toymakers like MGA Entertainment in Van Nuys and Mattel Inc. in El Segundo, as well as Hasbro, Lego and Crayola. Fifteen stores in Southern California, including those in Simi Valley and Santa Clarita, ceased operations. “There was significant infighting as to whether the company should survive or liquidate, and ultimately the lenders didn’t see the value in it and didn’t want to put the money in it,” said Brian Davidoff, turnaround expert at Greenberg Glusker in Los Angeles. “The brand is a venerable brand. It has a lot of stickiness to it, but the model wasn’t working,” he added. In a bizarre twist, Isaac Larian, chief executive at MGA, started a high-profile crowdfunding drive in March to save the chain, netting only $62,000 in public pledges. Larian eventually offered $890 million to purchase 274 U.S. stores and 82 in Canada. Toys R Us rejected the bid because it did not exceed liquidation value. The company ended up selling its Canadian stores to Toronto-based investment management firm Fairfax Financial Holdings Ltd. for $300 million. Larian finally withdrew the bid in May 2018. “As the maker of the No. 1 selling toy in the country, L.O.L. Surprise, Toys R Us has played a large part in growing our business and their absence will be felt by the toy industry at large,” Larian said in a statement after withdrawing the bid. “Moreover, I am most disheartened that the legacy of the retailer will be lost for future generations.” MGA did not respond to inquiries from the Business Journal about the brand’s current partnership and new format. Despite financial and logistical woes of the past, Toys R Us hopes to bring a whole new experience to kids and families. “We have an incredible opportunity to entirely reimagine the Toys R Us brand in the U.S. and are thrilled to partner with B8ta and key toy vendors to create a new, highly engaging retail experience designed for kids, families and to better fit within today’s retail environment,” Barry explained in his statement. The test markets in New Jersey and Texas are just the beginning for the partnership, with the companies planning to open more stores in 2020. Revenue will come from selling subscriptions to brands, which will in turn pay for in-store and online real estate, according to a B8ta interview with Forbes last month. Local impact For local business leaders in the toy industry, the shift looks promising – but they are cautiously optimistic. “They’re going to have a bit of a challenge on their hands. A lot of toy companies were burned last year from an inventory perspective. I think people are going to be treading carefully about doing business with them,” said Genna Rosenberg, chief executive of GennComm, a toy marketing agency in Woodland Hills. “There’s a good chance that it’s going to be successful. The whole industry is rooting for them. Especially if they start slowly with the two stores and really test the data before they roll it out on a larger scale,” Rosenberg added. New York-based Spatial.AI specializes in using data to help retail clients decide where to open stores. Griffin Morris, co-founder and vice president of product, said Tru Kids’ first two locations checks many boxes, but the companies could have honed in on their ideal client base a bit more. “We are measuring data in communities that captures, in aggregate, what is this community (to businesses). On our website, we have over 70 different segments of behavior,” Morris explained. “Some of these are related to families and kids and toys. We have segments like nerd culture, connected motherhood and family time, that are the types of segments, based on our analysis, we’d expect that to be the types of area where a toy store would want to focus on areas where there’s a lot of those behaviors, specifically.” Finding locations within large urban markets could mean looking for areas that host family activities. Studying behavior and interests of the community rather than traditional demographics could help optimize sales, Morris said. “The cost is going to be lower for their brick-and mortar-stores. Compared to brick and mortar sales before, they’re not going to need to make as much sales from that location as they used to for those bigger footprint stores,” Morris concluded. “I’m very confident in saying they will drive e-commerce sales with the strategy.”

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