For months we have been following the story of the Toys R Us bankruptcy and wondering if the department store chain could survive the perfect storm that it finds itself in.  We learned last Friday from several reports that the retailer could close all of its stores as early as this week.  Regardless of whether Toys R Us pulls through its challenging winter period, one thing is for certain: toy retailers, even when it comes to multinational giants, must be savvy about the way they are conducting their business or they may risk losing out to web rivals and discounters.

Is this bankruptcy due to bad management or it is an example of an industry that has been impacted by disruption; the shifting of how and where people buy toys with online sales through companies like Amazon keeping customers from the traditional in-store brand experiences and with many types of toys themselves taking a back seat to computers/electronics and other forms of entertainment.  Today’s children have less time to play and more to play with than any of us did as children.  Natural selection is going to weed out those traditional toy, digital, video game and other products that don’t break through.

The US overall toy business only grew 1% in 2017 which represents a big slowdown while the industry is trying to keep up with the rapid rise and fall of trends driven by social media.  The industry must find a way to jump on trends quicker and get the products to market in a matter of weeks rather than months.

Recently WSJ’s Paul Ziobro wrote an article on how toy manufacturers are trying to take a lesson from the fast fashion industry.  “The companies are lifting from the playbooks of fast-fashion retailers such as Zara and Forever 21, which can churn out new coats in just 25 days”. Fast-fashion business models are already revolutionizing the clothing industry, and the supply chains in fast fashion rely on being the most cost efficient, flexible, and timely for each specific product type.   Of course, this strategy may demand big changes in the industry’s supply-chain fundamentals, and also the long cycles built around manufacturing in Asia and shipping across the Pacific.

Another strategy they may want to consider is manufacturing and sourcing locally. Offshore manufacturing leads to high shipping costs, high carrying costs of large inventories and long lead times. Local production allows for smaller lots with more flexibility for customization as well as keeping up with changing consumer behavior and trends before they cool.

There will always be a toy industry but the question is how much revenue will it produce? How many companies can it support and how many toy retailers can continue to exist?

If Toys R Us goes away, where will shoppers go? (USA Today)

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GLDPartners is an international investment and advisory firm that specializes in revenue and infrastructure development projects at and around high-opportunity airports, seaports and strategic trade and logistics hubs.  The firm supports global manufacturers and companies with retail distribution operations with network design strategy and facility location analytics.  GLDPartners’ clients and market perspective is global and the firm is headquartered in Scottsdale, Arizona, with offices in New York, Washington DC and in the UK.  www.gldpartners.com