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Kid-Friendly Retail

Mexican toymaker Distroller is set to open its third U.S. retail space later this month at the Glendale Galleria shopping center. To partially fill the void left by bankrupt retailer Toys R Us, Distroller (pronounced “dis-tro-yer”) is counting on an “entertainment retail experience” that it perfected in Mexico. While malls have in recent years tried to draw in consumers by incorporating experiences such as concerts, fairs and farmers’ markets, Distroller has developed a unique formula aimed specifically at young girls. There, the company’s most popular toys are its Neonate Babies, colorful humanoid aliens sold at its Distroller Werld stores. Upon visiting a Distroller Werld, kids are visually transported into a colorful fantasy that mixes cartoon imagery and candy-store merchandising. They are invited to select their own Neonate Baby for “adoption.” The cuddly extraterrestrial then travels through a series of transparent tubes in the store before a helpful “nurse” delivers the baby and explains the responsibilities that come with being a Neonate parent. “The vaccination records say, ‘You got your first vaccine and your first shot; come back in two months and Nurse Tanya will do a check-up,’” explained Distroller USA Chief Executive Daryn Fillis. “There’s no cost for it. And that’s what brings you back into the brick and mortar.” While the check-ups are free, they provide parents the opportunity to restock on essential Neonate accessories such as food, medicine and pacifiers. Neonate babies sell for $29.99 and most accessories are in the $5 to $10 range. Neonate products can be ordered online, but you can only pick up the toys at Distroller Werld stores — not big-box retailers. That way, Distroller can oversee the adoption experience, which Fillis said is essential for fostering a connection with the toys. “How do you tell a child that it’s alive when it’s sitting on a shelf at a mass market store?” he asked. U.S. expansion Distroller was founded in Mexico City by artist Amparo “Amparin” Serrano in 2004. After gaining popularity in Mexico, the company brought on Fillis to manage its U.S. operation headquartered in El Segundo. The company, which has over 60 locations in Mexico, last year opened stores at malls in Houston and San Diego and plans to launch around 25 additional U.S. locations over the next three to five years. “Those first two stores were really the pilot program to see how the American consumer would react to the product and the play pattern that our toys give,” said Fillis. Distroller chose Houston and San Diego to launch its expansion into the U.S. because of those cities’ large Latino and Mexican-American populations, which were already familiar with the brand. At its Fashion Valley mall location in San Diego, 30 percent of sales even came from customers from Mexico. Fillis said the company chose the Glendale Galleria not just due to the area’s Latino community, but because the mall is a prime location to introduce the brand to new consumers. “Our strategy is really to go towards high-traffic fashion centers that have a high purchase per square foot,” he added. The company’s brick-and-mortar focus seems to be at odds with the toy industry at large. Online retailers such as Amazon.com Inc. and big box sellers including Walmart Inc. and Target Corp. are eating up a growing share of toy sales. And Toys R Us —once the largest toy store in the country — has shut down operations in the U.S. after filing for bankruptcy last year. The popularity of smartphone apps and games may also be hurting demand for traditional toys. Total toy revenue is expected to drop at a yearly rate of 1.1 percent over the next five years to $34.8 billion by 2023, according to a recent report by market research firm IBIS World. “The increasing use of smartphones for tasks other than making phone calls, particularly among children, has been a primary driver of the industry’s decline,” the report said. “Purchases of industry goods have suffered as more children have opted for surfing the web or playing apps on their phone rather than playing with toys and hobby goods.” Richard Gottleib, chief executive of consulting firm Global Toy Experts, said there are clear benefits to Distroller’s strategy of keeping sales in the store. “It gives you some control over your own destiny,” he said. “It’s a way to showroom your e-commerce product, and it’s also a way to establish your brand.” He added that while opening a proprietary retail store is an approach typically reserved for well-defined brands such as Disney, it could be a smart play as Target and Walmart continue to consolidate the brick-and-mortar market. “We’re in a market where Toys R Us has gone away in the states and the major mass merchants are less inclined to carry non-branded products,” he said. Collectibles Another key component of the Distroller strategy is collectability. It manufactures four different types of Neonate Babies — called Nerlies, Zygoties, Preemies and Espongies — each in different stages of Neonate development. In addition, the company also has a line of fairy-like dolls called Alushhhes. “We are very aggressive with taking our products to market; we try to always have something new,” said Fillis. “Every few months there will be new babies. We call them generation exclusive babies, which means that they come once and that’s it.” Collectability is an increasingly popular toy trend, with companies such Van Nuys-based MGA Entertainment Inc. seeing massive sales of its L.O.L. Surprise Tots. The miniature dolls, which come in dozens of varieties, were the top-selling toy last year, according to retail market research firm NPD Group Inc. “Collectables are an extremely popular play pattern with children, especially right now,” said Gottleib at Global Toy Experts. Distroller aims to be the next toy company to capitalize on the trend. It plans to move into major shopping centers across the country, including in New Jersey, Florida, Illinois, Northern California and the Mall of America in Bloomington, Minn. In Glendale, it will kick off its latest expansion in the U.S. with a grand opening for Distroller on a yet-to-be-determined date in late September. “It’s a big day for us,” said Fillis. “There will be giveaways and lots of fun activities for the whole family.”

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