Monthly Archives: April 2018

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Toy News Review – 4/25/2018 – TRU buyout stumbles / Mattel Setup

Its been a few weeks, and in that time, so much has come forward with toys. Two of the biggest stories are coming from separate ends of the industry and could have major consequences.

First off, the continued drama of Toys R Us keeps us on edge as the $900M bid by Isaac Larian, CEO of MGA, is denied as reported on the ICV2 website. Doing a little basic math would suggest that although $900M sounds like a good chunk of cash, that amount wouldn’t even put a dent on the estimated accrued interest for the past 10 years, let alone the value of the assets including inventory and land. Mr. Larian has told his legion of followers that he’ll continue to pursue an opportunity for a buyout. Whether Mr. Larian does or does not get the deal, he’s already won the hearts and eyes of toy lovers everywhere with his efforts. I sense this was part of the plan from the get go. Should TRU disappear, Mr. Larian has personally positioned himself to be the biggest marketing asset his company has with so many serious toy enthusiasts and industry professionals following him. It sounded a bit fishy when Mr. Larian made the call to the 30k TRU employees to follow him on LinkedIn. Of any toy CEO, he’s made the most noise in a positive way that’ll burn in the minds of all who work in the field.

Outside of the US, TRU has found saviors in key markets including Asia, Australia, Germany, Austria, Switzerland, and even Canada according to the source on ICV2 and cbc.ca websites. So, the brand will continue to live somewhere in the world.

Moving on to other news, major toy industry juggernauts are having a roller coaster of a time with announcements as Hasbro announces a $133M sales decline for the first quarter of 2018 vs 2017 with almost half as a result of the TRU closure, and Mattel announces its moving in a new CEO.

Hasbro confirms with a statement that the decline was anticipated, and precautions have been set in place to limit competition in Q1 and Q2 with the TRU liquidation and to expect some loss until 2019. The steady acquisition of clients over the last three years has opened over 20K new locations for Hasbro to help compensate for the TRU loss. I guess its no big shock there.

Mattel on the other hand, moved in a new CEO, Ynon Kreiz, former CEO and chairman of Maker Studios. Mr. Kreiz is bringing in a wealth of experience in media marketing and children’s entertainment which is something Mattel has lagged tremendously over the last few years to rival Hasbro. When seeing this post on linkedIn, commenters were quick to point out that Mr. Kreiz had extensive experience in dealing with Disney as many of his past companies were acquisitions to the mega-media company including Maker Studios and Fox Kids Group Europe. This setup could possibly position Mattel to be bought by Disney as its toy division that Disney, a division that has never really made a name for itself. It makes sense with the dying value of Mattel for Disney to swoop in and pick it up as many analysts feel its undervalued, and under the leadership of a proven business general, it should really be too long before it happens.

Lots of excitement in the air! Let me leave you with this bit of Japanese marketing genius. Should Japan do more of these commercials, they’d rule the internet.


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TRU gets a bid from a toy Isaac Larian – An Opinion

I just saw a post shared on LinkedIn by the nypost.com detailing a deal proposed by Isaac Larian, head honcho behind toy mega-brand MGA.

In the article, it states that Mr. Larian has been busy collecting funds through his personal assets, crowd funding (gofundme that raised around $52k), and silent investors at a tune of a whopping $1 billion. This would be for a few hundred top performing TRU/BRU stores in the US as well as the Canadian division. He’s given TRU just under 10 days to answer.

This most certainly sounds like a very honorable thing to do, but unless the silent investor group names end in Bezos, Zuckerberg, Brin, Page or Musk, there’s going to be SERIOUS new grounds to be gained.

Mr. Larian does try to comfort everyone on LinkedIn by announcing his excitement for the highly innovative idea for the store that he has yet to reveal all while taking some cheap shots at Mattel… granted if what was said was true, then they rightfully deserved it. Personally, I have a sneaking suspicion that Mr. Larian made a ton of noise on LinkedIn as a ruse for the attention of the masses especially the soon-to-be TRU alumni. I’m sure he does care about the industry as he’s been a part of it for so long, but really I find a great deal of his appeal to the public as a stunt to grab more eye-balls, the currency of the internet. The eye-balls you control, the more value you will produce in this day and age. So, really whether he goes through with his bid or not, he’s already got the eye-ball attention of all lovers of TRU. Quite brilliant.

In this interview with Fox Business found on YouTube, the interviewer hit him with the obvious question about how to even continue the TRU business, and I didn’t really hear a convincing answer coming from Mr. Larian.

Physical retail is a massive beast of an operation, and its completely different from the business of marketing or the production side of things. Even top US brick and mortar retailers today are barely hanging on, and to find someone who is remotely capable of making this into a reality will be a miracle. Most high level execs I’ve known have very little understanding of the operational pressure involved with retail as most think its nothing more than the same thing as their current business with numbers be all there is to it. I saw this disconnect with my former employer where executives from all around the world simply had the completely wrong idea about retail execution. It finally came to fruition when the company hit its breaking point and its restructure practically dissolved into little bits and pieces of its former self.

Although my opinion on this isn’t for the better, I can see how its not impossible if Mr. Larian enables someone with a massive amount of social clout to make this happen. And its got to happen FAST. The $1 billion is for keeping the stores as they are: hemorrhaging money. They’ll need to do some serious renovations to make it worth peoples time, and who know how much that’ll cost.


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Perspective on The Toy Association Perspective: #SaveToysRUs

In an article I saw posted in LinkedIn, Bob Wann, chairman of the The Toy Association Board of Directors, explains the group’s belief on why brick and mortar stores like TRU are important, and offers their support.

Basically, physical stores have been a cornerstone in the industry for customer discovery and purchasing, which I totally agree with if the opportunity presents itself. Having had both a physical and online store for so many years, I can most certainly understand how the power of the in-person presentation is much more effective in persuasion of purchase. This is where the true artistic art form of character building salesmanship comes into play from the store display, initial greeting, product showmanship, the closeout and the follow up. These elements build a stores ‘character’ and encourages true future customer engagement.

Though I do agree with the idea and I certainly want to save TRU, the statement leaves questions about a few points mentioned that never really get addressed.

The first is in the very beginning of the statement: “seismic, disruptive change.” Its followed with concerns of confusion, uncertainty, and ‘far worse’ news of the closing of TRU making it sound like the idea of change is bad in my opinion. This is really just a set up to express a sort of relief when it goes on to mention the possible salvation of a number of TRU stores that might happen. Saving TRU sounds like a good idea, but in its current state, it would make for tough business.

If anyone took a wide lens look at business in general today, every industry is going through massive change, and its always for the better of the consumer. From everything that I’ve been taking in from tech to toys, ‘disruption’ is something we are trying to achieve (market disruptor, anyone?).Everything from taxis to takeout, from physical fitness to mental wellness, and even employment has gone through ‘disruptive change.’ Most of the business tactics before the disruption were good for the industry as they were, but admittedly, I find the new change to be better. Its forcing stagnant, complacent companies to finally take the initiative to innovate, and the toy industry is long overdue compared to others. I’m still waiting for my real deal Hover Board, not the chintzy, explosive Segway wannabe.

The second issue I have with this statement is that although it explains that in-store discovery is important and touch/feel/play is magic, it doesn’t really explain any way on how to get customers back in stores. I mean, its great if kids can do this, but how can that happen if they never go in? This latest bankruptcy is not the first rodeo for TRU, as financial issues stem as far back as 2005 when they made the loan deal that locked them into a losing game according to the Fortune article here. So, this should indicate that simply having a place to go doesn’t really bring in an audience. Let’s be real here: kids don’t play with toys the same way they used to. Kids don’t play to entertain themselves so much as they want to entertain others or to watch others entertain them. This is why the surprise style toy is so big. Its also why discovery is no longer done in store for most people, its done on social media. From what I’ve seen with most hot toys recently, people discover items not sitting on shelves in a store, but in YouTube box openings, convention reviews, and a network of friends. That’s not the same as thinking the majority of customers discover items in-store.

Speaking a little on the TRU finances, I’ve read where people mention that TRU would have been profitable earning $350M in 2017, but they had something like $400M in interest payments from there 2005 deal. In other words, TRU was not profitable. I can’t understand why people don’t see that. Its akin to saying, ‘I would have made $1M in sales if it wasn’t for that pesky $1.5M in production costs.’ Obviously, no money earned.

Should the industry band together and save some existence of TRU, I’d like to suggest a few tips on what to consider in observation of the masters of the next-gen retailer, Amazon.

1) Lead the industry by having useful information. If you ask any modern consumer, and I’m hoping the industry as a whole is targeting modern consumers, they will all tell you the first place they look for pricing/availability is Amazon. Why does Amazon get to be the first option for TOYS? They’re not even a toy website. Change that. News, special promotions, offers, and release schedules should be found at TRU’s website. I’m not talking about TRU info, but all this info from toy producers. Create a website plan where product producers can curate and merchandise their products directly on TRU’s website. Add that to the marketing arsenal of the retail shop, and you’ve solved two problems in the industry: modernize TRU to compete with Amazon, and build an effective way to market for toy manufacturers to an endemic audience without needing to branch out of the industry. Facebook and Instagram are great for outside the core toy audience, but these platforms are far from ideal for the industry.

2) Earn consumers trust. In a recent article on Inc.com, its stated that trust is just as important as price in the modern retail environment. Although traditional ways of gaining trust through donations are fine and dandy, more is needed today including visibility of the personnel. Every once in a while, Jeff Bezos would put out a scanned copy of an announcement for upcoming news for amazon right on the front page. I can’t believe 100% that it truly is Mr. Bezos who’s doing that, but the perception is endearing for most, and it makes anyone who visits Amazon’s site more comfortable. Another way would be to foster a strong network of influencers from various social media platforms. YouTube’s been under a lot of heat recently with misguiding kids to inappropriate info, and as YouTube gets more and more saturated with this type of content, its more likely kids will fall in to this trap. Build a ‘toys only/approved, authorized influencer’ platform just for toys accessible through the site and a proprietary app. This will keep kids glued to the smart phone in a self contained environment of just the appropriate subject matter. Also, feature influencers with appearances at various locations around the country. Everyone loves a local celebrity.

3) Have the products people want. At this moment, I can order something from Amazon, and have it ready to pick up at a locker location by the end of the day. Its always a good thing when the store you go to always has the one thing you’re looking for in stock when you get there. I know pick up services have been around for a while, but the difference here is Amazon has EVERYTHING available including exclusives from everywhere. Will TRU be able to do this? Maybe they can partner with Hot Topic or GameStop so whenever they get exclusives that TRU can offer them as well, or TRU can simply capitalize off the fact that they get the ‘first to market’ news and offer before the rest of the industry. This move can ruffle some feathers with clients, but this is a key component to the success of Amazon.

4) Make the process quick. When I go to an Amazon locker, I scan my smart phone and a locker pops open for me to get my product. TRU needs that same convenience. Most online pickup options have me waiting in the Customer Service line, behind all the returns, then waiting for the clerk to figure out who I am and what I’m doing there, then waiting for the clerk to find my product. Add pickup lockers, in the middle of the store so people can grab there goods and get a good view of all the impulse items along the way.

And now this journal entry is three times longer than the original statement released… Just some bubbling ideas that popped in my head when reading the statement from the Toy Association. Embrace disruption, and lead the industry as you were meant to do.

About The Toy Association

Founded in 1916, The Toy Association™, Inc. is the not-for-profit trade association representing all businesses that design, produce, license, and deliver toys and youth entertainment products for kids of all ages. Our 950+ members drive the annual $27 billion U.S. domestic toy market, and our organization has a long history of propelling the health and growth of the toy industry, which has an annual U.S. economic impact of $109.2 billion.

http://www.toyassociation.org/ta/about-us/toys/about-us/about-us.aspx


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Toy News Review 4/5/2018

Here are my thoughts on some recent toy news:

KB Toys Announces its plan to open 1,000 pop up toy stores!

https://icv2.com/articles/news/view/40053/owner-kb-toys-brand-hopes-open-1-000-pop-up-toy-stores
https://www.retailwire.com/discussion/kb-toys-plans-a-christmas-comeback/

There seems to be a great deal of wishful thinking on the side of KB Toys in the wake of the TRU collapse. Though it sounds like this holiday season may be saved for toy retailers, the idea of ‘we’re creating a physical shop with a grander experience’ is dead. Unless you can create Disneyland, there is no retail experience that i can think of that can motivate people to go to a physical shop anymore. And that should say a lot coming from a guy whose sole livelihood depended on engaging retail experiences for over 10 years. Some more service based businesses can pull this off, but if the bottom line of your physical business is to sell actual products, its not going to work.

Long term customer loyalty and community are the keys to any physical business, and its extremely difficult to do that in this very expense age. If the idea of a toy shop is simply going to be seasonal pop up shops like the Halloween store, it’ll be sustainable, but with a limit and a much lower market relevance.

The only way any new physical brick and mortar operation will succeed will be when retail real estate prices collapse. Products are already being produced at the lowest possible cost with the cheapest possible quality before becoming toxic, and the cost of employees is rising, but that’s a resource that is directly responsible for income for the business and can be tuned to grow substantially in a relatively short amount of time. retail real estate prices both purchasing and renting, will need to adjust in order to make shops a viable business opportunity. As online sales continue to take market share, the cost of retail leases needs to adjust along with the diminishing profits of a business. It won’t ever happen because managing land is a business in itself, but maybe this is just a sign of the times where toy stores are simply not needed.

Even the comments in these articles hit on some common sense hurdles that a ‘guest KB Account’ tries to counter, but falls into that ‘wishful thinking’ category with answers with no real substance. Each answer had already been debunked by failed business attempts in years passed. The most positive point is echoed as ‘that’s an good idea.’ Good idea, yes, but a bad business.

Amazon buys into LotR TV Series deal

https://www.hollywoodreporter.com/live-feed/how-lord-rings-tv-series-landed-at-amazon-not-netflix-1099213

Massive deal considering the movies hold up well today almost 20 years later. Even the Hobbit trilogy stands up against time even those the story and musical numbers were lame.

With this mega video license will also come a windfall of opportunity for licencors if Amazon doesn’t own all of them for the TV series as well. What better advertising on Amazon can you get than from a property owned, viewed, and already promoted on the biggest selling platform in the world?

Amazon could probably quite easily produced every single product in a licensing catalog if it really wanted to with all the intel its gathered over the years from white label manufacturers from all around the world and the insight that tells what the hottest type of items sell to specific age demographics for specific licenses. I’m expecting this to be THE next must-binge series after Game of Thrones.

Toymakers struggle to crack the code of what kids want

http://www.chicagotribune.com/business/ct-biz-big-toymakers-troubles-20180402-story.html

This isn’t new news. This is what the toy industry does on a daily basis. More attention is given now that the primary leverage toymakers once had with TRU and other larger retailers looking to try new things disappearing, and the great retail expanse of the online world is still a unbelievable mystery to long time industry veterans who’ve fallen far behind other industries like gaming.

The article highlights for me a few glaring realities: toys nowadays have fallen victim to the ‘fast-fashion’ production model where cheap, disposable products are the norm. Toymakers need to find a new model in building a brand from there own marketing efforts and be less reliant on retailer marketing. Movie toy tie ins just don’t seem to have the same effect as they once did, and Makers need to go global to find growing markets. There is a point at the nd where it mentions parents will want to give their kids STEM toys or share Star Wars, but that sounds like buying toys more for the parents than for the kids. I’ve never heard a kid as for a STEM toy, and if it were so popular, then why is Lego falling? Regarding Star Wars, after the last movie, my kids want no part of it.

So long Minecraft: Fortnite passes Minecraft in YouTube viewership

https://www.vg247.com/2018/04/02/fortnite-officially-surpassed-minecraft-youtube/

Finally, that repulsive, beta-looking, blocky ‘game’ design can be laid to rest and finds its place among other dying Microsoft gaming products in the shadows of greater titles and experiences.

I’m guessing this is where the early Minecraft audience went after growing up. They made Minecraft big then, and the same generation is now moving on to Fortnite. This is a generational trend someone needs to take notice. Minecraft is really old hat nowadays, and with no true innovation coming up, I can’t see it growing any larger for Kids than it already has. It may have buy in with the educational system, but as far as kids and the passion kids have, that phase has passed. If I had to give an example: its like when I was given a Captain Planet figure from my school because it endorsed the TV show. You didn’t really want it, but the idea was good from the school. What you really wanted was the new TMNT Casey Jones figure. That was passion.

I expect Fortnite to continue to grow as it fosters stronger community through open channel communication as well as competitive play which is addicting by human nature.

Small business and how to do it

https://icv2.com/articles/news/view/40003/mining-outside-diamond

Great article that puts many touchy subjects for small business owners out in the open including a list of distribution resources. Definitely worth checking out for any small business owner.