(Bloomberg)—Toys R Us has a new owner as the retailer that once dominated the market for children’s playthings seeks a path back to relevancy.
WHP Global will take a controlling stake in Tru Kids Inc., an entity that acquired the brand’s intellectual property during the retail giant’s 2018 liquidation. A former Toys R Us executive started Tru Kids to revive the brand and has been owned by investment funds including Solus Alternative Asset Management, which will remain a shareholder.
WHP Global will manage the business and “direct its strategic expansion,” according to a statement Monday. Financial details weren’t disclosed. WHP Global is a company that acquires consumer brands to help turn them around, according to its website. It owns apparel brands Anne Klein and Joseph Abbound.
Yehuda Shmidman, WHP’s CEO, has been on the Tru Kids board since 2019. WHP is backed by a $350 million equity commitment from funds managed by Oaktree Capital Management.
Recent history at Toys R Us
The sale marks another turning point in the tortured recent history of Toys R Us, which defined the toy industry for generations of U.S. consumers in the 20th Century. The company filed for bankruptcy in 2017 amid crushing debt and rising competition from online sellers such as Amazon.com Inc. (No. 1 in the 2020 Digital Commerce 360 Top 1000).
With the chain’s U.S. stores closed, the Toys R Us name has been used in recent years for a website that markets toys and then directs shoppers to another retailer to make purchases: originally Target Corp. (No. 12 in the Top 1000), then Amazon.com more recently. Similar to an affiliate website, when a shopper goes to a product detail page on ToysRUs.com and clicks “Buy Now” she is redirected to that product on Amazon.com. The site clearly states that a product is “Sold and shipped by or fulfilled through Amazon.com.”
While outsourcing fulfillment and operations is beneficial for Toys R Us in terms of efficiency and cash flow, it does little to build an audience and and brand, says David Marks, general manager of strategic initiatives at Rakuten Rewards, an ecommerce affiliate network.
When Toys R Us filed for bankruptcy, many of its shoppers migrated to mass merchants, and Toys R Us needs to reacquire them, says Rakuten Rewards president Kristen Gall.
“Establishing themselves as a better place to buy toys than retailers that have since captured market share–such as Amazon, Target and Walmart–is going to require Toys R Us to have a very targeted and smart strategy,” Gall says.
COVID-19 impact on toy sales
Tru Kids opened two U.S. stores in 2019, but those locations closed recently due to the crippling effects of the coronavirus pandemic on the broader retail industry. This incarnation of Toys R Us is on a long list of retailers damaged by COVID-19 after governments forced nonessential chains and malls to close and then put restrictions on operations.
Online, however, the toy category boomed during the pandemic. In April 2020, for example, online toy sales were up 175% year over year and were still up 180% year over year in May, according to Rakuten Rewards, which collected toy sales data from 3,500 merchants that sell via the affiliate site Rakuten.com. In October 2020, Digital Commerce 360 estimated that the U.S. merchants in its toys and hobby product category were projected to grow ecommerce sales 195% in 2020. That’s up from a Digital Commerce 360-estimated 10.9% growth in 2019.
Plus, online toys and game sales have not slowed in 2021, with year-to-date 2021 online toy sales up 134% year over year and website traffic up 48% year over year, according to Rakuten Rewards data.
But how ToysRUs.com fits into this remains to be seen. “This will be a big effort and involves creating significant awareness that Toys R Us is back and can provide consumers with a very appealing competitive advantage, including price, curation, a differentiated in-store experience or an easy-to-use ecommerce platform,” Gall says.Favorite