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

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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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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.


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TRU is closing, and kids don’t care, but I do

Category : Blog

You knew this was coming. Don’t kid yourself.

This was all part of the inevitable just like other mighty legacy titans of retail before it. Its a similar story to Sports Authority, Tower Records, The Good Guys, Circuit City, and Radio Shack. The only difference here is that now it feels its directly affecting kids and we can’t help but to try and ‘save the children.’

But lets be real here; kids aren’t into TRU anymore. Kids are barely into toys nowadays.

My definition of a ‘kid’ since my early childhood had been little people between the ages of 4 to 14. Kids actually played with toys back then. That age range has slowly gotten smaller and smaller heading towards the younger years. Nowadays, I feel the term ‘kid’ is between 3-6, and then beyond that, we’ve got tweens and teens who now adopt a new toy that many old-school, plastic printing, major players are afraid to recognize: smart phones. The age shrinkage isn’t going to stop either as smart phones and other devices are quickly becoming the Swiss Army knife of automated babysitting for the busy modern day parents. What toy can you think of that can double as a scientific calculator and a baby rattle at the same time? Now, the deceptive ambiguous term ‘kid’ should die along with the TRU brand.

If there was anything I could do to save the business, I would. It was a treasure in my childhood and it still the ‘go to’ whenever I feel the urge to scratch the toy itch. However, due to the rapid evolution of shopping in the the US, the stale, rigid processes of aging legacy business, and the ever changing interests of the youth, it was just a matter of time.

With most industry people and news sources stating that this will be a loss for kids, but if you notice, it’s not the kids next to the adults that are expressing emotion, but the kids inside the adults. Modern kids don’t know TRU. Unless they have a family member that works for the company, Geoffrey the Giraffe would be nothing more than a retro meme with a damn catchy theme song that old people can sing by heart. I saw a video of a costumed Geoffrey walking into a classroom to meet a group of 6-8 year old kids. The confusion on their faces was priceless. They didn’t know who the hell Geoffrey was. How could they? With zero awareness made through any standard media modern day kids consume, this visit was more of a surprise introduction than anything else. At these kids’ age, they should have already known the theme song.

If TRU was seriously important for kids, I don’t think Walmart and Target would have been such a threat. Its not like those companies are promoting any better. I do feel both Walmart and Target have a better online presence than TRU, but that’s not saying much since they are all pretty atrocious and pale in comparison to the online juggernaut.

From this, I’ve learned that my idea of creating an engaging experience at a retail store might not work after all. I was a big believer that if you created an event out of a place, it would be worth it to go there. This works well with serialized magazines and media as well as competitive types activities like card games. However, if a store is simply touted as simply retail, and if you can’t sell it better than the next guy, regardless of all the bells you ring or whistles you blow, you won’t get the business.

TRU needed to become the leader in toy news not only for the industry, but for the partner companies. By being the initial source, it would have made for the perfect chance to catch customers online to buy right then and there, or at least guide them to the store closest to them.

I do feel they needed to reduce store especially after hearing that there were over 150 stores that were within a 15 minute drive to one another. That seems extremely excessive in this day an age. If they would have closed those stores during the first restructure over a decade ago and reinvested it into the online strategy, we could have been looking at a whole new eCommerce landscape.

There is no separation between physical retail and online retail. Retail is retail. The product you get at a store will be the same product you get online. Even when a physical retail store gets an exclusive, you can best believe it’ll be online, Amazon specifically, within the first hour that the first store offers it. Scalpers know this all too well. If online retail is only a fraction of the whole revenue, boil those numbers down by how much it cost to make each dollar and I’m pretty sure you’re profiting much more via eCommerce. Plus, any lack of sales online is made up for the compounding interest of online marketing through social media promotions. The whole box opening phenomenon should have been a trend TRU invented.

To look for a silver lining, I hope this will open up the doors of the long time stubborn, pretentious toy producers to partner with small business entrepreneurs without the need for a $500k yearly minimum guarantee or manditory EDI integration. Its not about selection anymore. Its about diversifying your client portfolio. If that means hiring more staff for account management and order processing, do it.

Will the brand name continue to live after this? Probably as an online store for a while before just fizzling out. Just go over the list of names of ‘unforgettable’ legacy business mentioned earlier in this article, and you tell me.

To me, its just water under the bridge. Toys will survive by evolving, and business will go on as usual.