Toys "R" Us New Stores And Experiences Creative But Still Risky In This Consumer Market
Recent news has Toys "R" Us (TRU) making a comeback into the US retail market beyond the previous Macy's deal. It's a sad gap that we have just witnessed since they declared bankruptcy in 2017 and 2018, with the last US store closing in 2021 (has it been that soon? really?).
What most people in the US do not realize is that the US was the exception, not the rule. Toys R Us has been operating continuously in many countries around the world despite the historical US difficulties, mostly caused by too much debt.
What's happening now?
Well, backing up for a moment... The controlling interest in TRU is WHP Global, who acquired a controlling stake in the firm in 2021. Since then, the biggest coup has been WHP's deal with Macy's who is funding and operating the toys category in all their stores.
Go! Retail has secured a license to operate 24 stores in the United States, starting in 2024.
Additionally, TRU is coming to cruise ships and hotels -- I did not read who was operating these but I expect these to be very experiential, and definitely a draw for families if that's the case. Whether or not it works, it's worth it for WHP Global to try, right?
(note, I am on the Board of Advisors for WHP+, the digital arm of WHP Global)
For WHP Global, this is elementary. As the intellectual property owner of an extremely valuable global brand name, if you can invent a concept that someone agrees to operate for you, can you generate licensing revenue from it.
If you're curious to understand licensing.... the simple way is to watch "Mr Wonderful" on Shark Tank, most of his deals work that way and he seems to make most of the money LOL.
As part of this deal, WHP Global itself takes none of the inventory risk from any of this as its partners operate it all.
Back to the consumer for a moment, however:
I think that Toys R Us (and by that, I mean its operators, not WHP Global) needs to be careful. In this economy right now, you have to be both premium/interesting (otherwise, where are the margins?) and value-oriented (otherwise, how are you going to get the masses into the door). For a retailer looking to break into the market, that is a tricky balance for the new retail stores.
