The Power of Licensing #4: R.I.P. TRU? Maybe, Maybe Not
Are we about to say farewell to Geoffrey the Giraffe, the Toys R Us mascot? Are we never again to be serenaded by the jingle “I’m a Toys R Us kid”? Or is this just adieu (until we meet again)? Toys R Us filed for liquidation on March 15, 2018, seeking to shutter its 735 stores and sell off its inventory. This follows the Chapter 11 bankruptcy in September 2017 when the retailer announced a turnaround plan. Alas, the iconic retailer just couldn’t steady the ship in rapidly changing retail waters while saddled with over five billion dollars of debt incurred when the company was acquired over ten years ago by KKR, Bain Capital and Vornado Realty Trust. There are conversations with a potential buyer for the Canadian operations (which could include some of the successful stores in the U.S.), in which case Geoffrey and the jingle will still be around, albeit with a Canadian accent. (I wonder if exporting this brand to Canada adds to our trade surplus with our northern neighbor?) And the future is uncertain for some of the other international operations (although stores in the U.K. will be closing). But if all of this falls through, is that the end? Toys R Us takes its place in the dustbin of failed and lost retailers? Well, maybe not. Let’s take a look at another path for this retailer.
Over the past decade or so, we have witnessed the demise of many iconic retailers, including Borders, Circuit City, Blockbuster, Fortunoff’s, Bonwit Teller, Bombay Company, Wilson’s Leather, Sports Authority, The Limited, B. Dalton Booksellers, Tower Records, FAO Schwarz, The Sharper Image, and others. But although brands can easily fall and disappear from the market, they are not so easily erased from our memories. There are many possible reasons for a brand’s demise and disappearance, but usually bad management decisions and the inability to keep up with changes in the marketplace are at the root of the problem (for example, Blockbuster never saw Netflix coming). In the case of TRU, Walmart and Amazon beat them on price as well as online. TRU’s stores needed upgrades as did their website. The customer experience in the stores was miserable. And customer experience is one of the arrows in a brick and mortar retailer’s quiver when combating online retailing. TRU failed to keep up with the changes in the marketplace. But TRU’s problems predate the stiff competition that developed in the marketplace. In fact, years ago they knew what they had to do, but the debt prevented them from having the funds to make the necessary changes to their store experience and their website. They started to fall behind ten years ago and the rapidly changing retail landscape accelerated TRU’s demise. Management couldn’t afford to make the decisions that needed to be made. The financial challenges were simply too great to overcome.
But brands that die can live again and often get revived through licensing as well as other business models. The Sharper Image is a retailer that came back almost entirely through licensing the IP. Polaroid went through two bankruptcies, was revived once, died again, and now has been successfully revived through licensing. KB Toys, once the second leading national toy retailer with 1,300 stores at its height, went out of business in 2009. The owner of the IP, Strategic Marks, has announced 1,000 pop-ups for Black Friday and the holiday season this year and has said that some of the pop-ups might become permanent. KB is trying to fill the gap left by TRU (this is ironic given that KB was once a division of TRU). FAO Schwarz (then owned by. . . TRU!) closed its flagship in 2015. TRU subsequently sold the IP to ThreeSixty Group which has announced that it is opening a new store in New York as well as airport shops (Bon Ton stores, also suffering financially, opened FAO shop-in-shops last year in many of its stores). And those are just several examples of brand revival through licensing or other models relying on third party partners. It’s a cost-effective way to bring a brand back to life. And, sometimes, although we remember the brand fondly, we are actually misremembering the brand. Brim was a decaffeinated coffee. It was revived as regular coffee. Consumers didn’t remember that it was originally only decaf; that’s why you could “Fill it to the Rim with Brim”. They accepted the brand revival as regular coffee. Brand revival gives a new owner the opportunity to modify the brand positioning without departing from the brand’s iconic status. So, could someone come along and purchase the TRU intellectual property (the name, the logo, Geoffrey, and the jingle) and bring the brand back through a different model?
TRU has many of the elements necessary for a successful revival.
First, there’s a lot of awareness. It’s an iconic brand and has been for 70 years. It won’t be out of the marketplace for very long if someone acts quickly.
Second, a large group of consumers have an emotional attachment to the brand; it has authenticity and trust.
Third, to be successful, it has to fill a market gap. I’m not sure going back to the large, big box footprint brick and mortar model is the way to go (perhaps a flagship here and there). Walmart and Target can keep toy prices low because their stores offer a full assortment of other products to consumers. That was never true of Toys R Us. Perhaps a really dynamic online presence would work for TRU, alongside a different offline presence. Perhaps smaller neighborhood stores or pop-ups. Or stores within another store as a retail exclusive.
Fourth, TRU tells a good story. A new brand has to invent a new story, and that takes time and money. TRU’s story is already built in.
Fifth, new owners will, of course, have to figure out how to compete with Walmart, Target and Amazon. They will quickly fill the vacuum left by the disappearance of TRU (that’s what KB Toys is trying to do). This will be a formidable task. But TRU did sell a lot of toys. And that vacuum is real, as toy manufacturers are well aware. Perhaps they create a line of TRU branded toys and playthings, a departure from what TRU has been to date, while also selling brand name toys. And, of course, TRU, as a store dedicated exclusively to toys, has always represented a great experience for kids - - a place that they loved to visit for events (like birthday parties or holidays), or great displays (like a giant Lego Empire State Building) or other attractions (like robotics). Kids were emotionally attached to the TRU experience and parents enjoyed giving their kids a trip to the store as a treat. That’s how TRU can win against online competition (it’s really no fun for a kid to buy toys online) and can also win against Walmart and Target which can’t devote that much energy to their toy aisles.
And, sixth, whoever attempts this kind of IP comeback needs to be prepared to provide strong management and strong marketing support. This is where buyers of dormant brands generally fall flat. They think that the iconic name will sell itself. It doesn’t work that way. Without strong management and marketing support, the brand will die a second death. And TRU is in a very competitive category where a lot of money is invested in marketing and sales, both online and offline. We know what caused the demise of TRU. New owners need to be careful not to repeat the same mistakes. While consumers have fond memories and associations, it’s also true that they have been moving on for some time and will move on when TRU is no longer available. But consumers can be won back.
Can you feel the power of the Toys R Us brand? That’s actually the seventh element of a successful brand revival. Can you re-imagine how it can succeed again? It won’t be easy. No brand revival is. But fond brand memories, strong attachments and brand loyalty, while not guarantees of a successful brand revival, certainly are a good start. Those elements combined with smart strategic thinking, a creative go-to-market plan, strong brand management and marketing support could be the recipe for a successful revival of Toys R Us. Don’t count the brand out quite yet.
This post originally appeared on Forbes.