Toy retailers with a large number of physical stores do not have an easy time.
Amazon has an unbeatable wide range of products. Other competitors are supermarkets and drugstores, which are closer to the customer. This had become the disastrous situation for Toys R Us, which closed all 800 stores in the US alone in summer 2018 after the more than 70-year-old company went bankrupt. In Switzerland, Germany and Austria the stores were taken over by Irish competitor Smyths Toys.
It's actually strange that toy stores have become an early victim of the online competition. There are hardly any products better suited to be touched and tried by customers in a physical store. Children (and their parents too) are probably the most grateful customers when all the senses are addressed in a shop.
So what went wrong?
Big Box retailer like Toys R Us had set too little value on experience, the shops were huge warehouses with little feeling for children. With the large selection there was not enough trained staff to bring the children and their parents closer to the products. In this way, a physical toy shop cannot compete with online providers. What's the added value?
The huge existing number of shops had become a problem for Toys R Us, because it was not possible with a high debt burden to modernize the spaces, integrate experiences and increase and train the staff. It remains to be seen whether Toys R Us will emerge from the ashes. In the summer of 2019, the company, which has found new financiers, announced that it will open new smaller stores with more experience for the little ones.
Will Toys R Us emerge from the ashes with the help of a Bay area start-up?
Interesting news is, that these new shops will be operated in cooperation with b8ta, a technology-driven retail company from the San Francisco Bay area, founded in 2015. The company already has 17 shops at the end of July 2019 in which retail brands can rent space to present their technology products to end consumers. All products can be touched and tried in the b8ta stores and the employees who call themselves "b8ta testers" are very well trained to really explain the products, which also can be purchased in the store. The young company is using a software platform to enable the retailers to analyse the customers experience with their products and to get a direct feedback of the consumers.
I recently visited the b8ta stores in Palo Alto and New York and got the impression, that the company is very good at showing and bringing new products closer to people with an affinity for technology. It remains to be seen whether this approach will also work for children and whether it is the right one.
The newcomer CAMP
CAMP is pursuing a different approach in the toy business, having opened its first store only at the end of 2018. CAMP has chosen one of the most expensive locations in the world for its debut: the 5th Avenue in New York, not far from the famous Flatiron Building. When I entered the store, I was not very impressed at first. The shop didn’t look very big on first sight and there were, of course, toys on the shelves, even if well curated. There is also an ice-cream parlour, operated by a partner. When I asked if there was anything more to see (of course I knew that there was something special in the store, but not where and how it looked like), I got the aha effect. Before my eyes, one of the friendly employees opened a real secret door, which was hidden behind a shelf. And behind this door is CAMP's USP. A big playground, whose theme is changed every few months. When I visited the store in July 2019, the theme was cooking. So there was a kitchen landscape for children, a garden to learn how to plant herbs and cooking courses for the little ones and their parents. There were also lots of related toys to try out (and buy).
Community building as the key to get returning customers
Parents can have their children supervised by the staff and play for free for a few hours. There are affordable memberships available which also include babysitting for evening hours.
CAMP also offers events outside the store (summer camps etc.) and wants to build a community so that families can come and meet regularly. Many of the regular visitors are children with their families coming from the neighborhood in Manhattan or families who travel regularly to New York.
CAMP plans to open three more stores this year. The investors are venture capital firms. CAMP's board includes Michael Goldstein, who led Toys R Us as CEO in the 1990s.
And in Switzerland?
I'm curious, what we'll see in Switzerland. With the management-buy-out of Franz Carl Weber by the CEO Yves Burger and the Digitec founder Marcel Dobler, strong players with the right know-how are represented who can also show us in Switzerland what potential there is in the toy market. What Smyths Toys is planning in Switzerland will also be exciting. Will it remain a pure price war, or will Smyths Toys also focus on Experience?