Do you never count a good giraffe?
After going bankrupt and closing all its stores in the United States, Toys R Us / Babies R Us has come under a new owner with a plan to not only grow its remaining international locations, but also to return to its own market in the U.S. The new company, Tru Brands, will be led by former marketing chief Richard Barry, who will now serve as CEO.
Tru Brands is not a traditional company. It controls global assets that generated more than $ 3 billion in sales in 2018 through more than 900 stores and e-commerce efforts in more than 30 countries around the world. Asia, Europe, Africa, and the Middle East. The chain has a much lower profile in the US UU., That was limited to some supermarket kiosks during the last holiday season. Even so, the company has a high name recognition among parents and still has more than 9.5 million followers on social media channels, according to a press release.
Where is the market?
The death of Toys R Us brought into play about 19% of the toy market in the United States (approximately $ 4 billion a year). That is a major market opportunity and several players tried to fill the gap during the holiday season. Most notably, objective (NYSE: TGT) Y Walmart (NYSE: WMT) They expanded their toy sections from the week of Thanksgiving to Christmas and Amazon (NASDAQ: AMZN) He created a circular digital toy to promote his offers.
Barry believes that there is still room in the market for brands dedicated to toys and baby products.
"Despite unprecedented efforts to capture the market share of the US In the last Christmas season, there is still a significant gap and high consumer demand for the trustworthy experience offered by Toys R Us and Babies R Us, "he said in the press release. "We have a once-in-a-lifetime opportunity to write the next chapter of Toys R Us launching a new omnichannel retail experience for our beloved brands here in the US In addition, our strong global presence is led by experts and passionate people. 100% operational teams focused on growth ".
That sounds good, but the revived brand enters a market that has largely compensated for its absence. MattelFor example, sales fell 5% in the fourth quarter and the company claimed a negative impact of 8% for the loss of Toys R Us. Rival HasbroThe figures were worse, as sales fell 13% in the fourth quarter, some of which the company attributed to the sale sales of Toys R Us. However, that was not the only reason for the fall, since the company also mentioned the lack of a new Star Wars Movie how to hurt your sales.
Is there a need?
It's fair to say that part of the market share that Toys R Us once ordered has gone to Walmart, Target and Amazon. It's easier to say than to come back with a new chain of stores than to do it when the three main rivals will enjoy a price advantage and, in the case of Walmart and Target, the toys can be low margin sales or even loss leaders that make it easier for parents to have their children go shopping with them.
According to CNBC, total toy sales decreased by 2% during the holiday season. That suggests that most Toys R Us businesses have gone elsewhere, largely to Walmart, Target and Amazon most likely. That means that this new version of Toys R Us enters a market where there is a limited need.
New owners understand that new stores should be more interactive, giving consumers a better reason to visit than "we have toys." Barry clearly understands how epic is the task of returning the brand to a significant place. He has made it clear that everything, stores, pop-ups, even partnering with Amazon, remains on the table.
That's an intelligent recognition, but the bankruptcy of Toys R Us left a hole that was quickly filled by the brightest stars in the store. Competing with Walmart, Target and Amazon when Toys R Us had a network of consolidated stores was a challenge. Starting from scratch – against eager competitors to make sure the dead remain dead – can be an impossible task.
John Mackey, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of the board of directors of The Motley Fool. Daniel B. Kline has no position in any of the actions mentioned. The Motley Fool owns shares and recommends Amazon and Hasbro. The Motley Fool is short Hasbro shares. The Motley Fool has a disclosure policy.