Global Toy News

The Spaldeen Ball Makes the New York Top 50

Are toys important?  Some citizens of New York certainly think so.  The New York Times recently developed a list of objects that it felt best represented the city of New York.  (“A History of New York in 50 Objects.”)  After they published the article, they then asked readers to offer up the objects that they felt most represented the city of New York to them. 

In an article by Sam Roberts, “New York’s 50: Wait! There’s More,” the newspaper published the readers' 15 picks.  The list included anything from the pistol that Aaron Burr used to kill Alexander Hamilton to the Black and White Cookie to the Subway token.

I am very pleased to state that the Spalding Spaldeen ball came in at number 9, right after the brass doorknob.  According to Wikipedia, the pink Spaldeen ball was introduced in 1949.  It was used in stoop ball; stick ball and a myriad of other games…talk about a play platform.

The world never stands still so the Spaldeen now comes in a number of colors.  Still, it’s a classic and all of us should be proud that a simple rubber ball in part characterizes what many consider to be the greatest city in the world.

 

Cats and Fashion Week

Cat Ear Beret from Proenza Schouler

I continue to be fascinated by how much modern adults wish to embrace childhood.  That was what I thought about when I spotted an article about the cat trend at this year's Fashion Week.  The New York Times article, "Cat Fever: Here, Kitty; There, Kitty," references everything from cat ear berets to "kitty-embroidered shoes."

Cat Hat from Maison Michel

And let us not forget our own Hello Kitty a la Converse Chuck Taylor Hello Kitty High Tops
 

Fighting Knock-Offs: The Plagiarius Competition 2013

Plagiarius Award

I was not familiar with the Plagiarius Competition until Dr.Toy, Stevanne Auerbach, sent me information on this annual competition to stigmatise those who infringe on other’s intellectual property.  Here is how the competition describes itself:

Initiated...back in 1977..., the negative award "Plagiarius" serves to inform the public about the problem of fakes and plagiarism and the negative impact they have on not only the economy as a whole, but also on small companies and designers...The award is given to those companies that the jury has found guilty of making "the most flagrant" design imitations.

It appears to be effective.  After receiving the award, some of the copiers came to terms with their accusers?  And let’s face it; it has to be satisfying to be affirmed by an unbiased panel of judges.

Knock-offs are a constant concern, particularly in the toy industry.  If you feel that you and your business have been infringed upon by another company, you can find a Plagiarius  application by clicking here. 

Canadian Retail Sales Are Robust; Target, Nordstrom and Other American Retailers Move North

I have always had a fascination with Canada.  I was, as a child, undoubtedly the only 12 year old in Virginia who followed Canadian football and politics.  In adulthood, there were two outcomes from this fascination:

1. I wore, for a short time, a Winnipeg Blue Bombers hat.  It was, ironically, stolen from me on “HatNight” at Madison Square Garden.  The lesson from this being that you should never take off your Blue Bombers hat at a Rangers game.  In fact, you should probably never take off any kind of hat.
   

2. I have, with some success, tried over the course of my career, to make inroads into the Canadian toy market. 

Canada, for those Americans who try, is not a particularly easy place to find success.  That was why a New York Times article entitled “American Retailers Face Challenges in Expanding to Canada’ caught my eye.  The authors, Ian Austen and Stephanie Clifford, summed it up this way:  “American retailers extending their reach northward seems like the most obvious of moves. But until recently, the Canadian market was hard to crack for many companies. The Canadian dollar was weak, costs were higher, and with limited real estate development, it was difficult to find space.”

That seems to be changing, however, as the Canadian economy continues to be comparatively robust and their dollar is strong.  “Canada’s allure is basic: Sales per square foot at Canadian malls were almost 50 percent higher in 2011 than sales per square foot at American malls, according to Colliers International Consulting, a real estate research firm.”

As a result, a number of American companies are making the move north, Target and Nordstrom to

Louis Marx - The King of Toys

In case you didn’t know:

Paraphrased from Vol. 1, No. 1 of the Marx Toy Collector Newsletter, circa 1981

Louis Marx, the one and only KING OF TOYS, started out in about 1921 with his brother Dave, buying up dies for making lithographed metal toys, from his former boss, F. Strauss.

The brother started out making the iconic rope climbing Monkey and an African American version of same, about 8000 pcs/day. While these had already been on the market since before the turn of the century, Marx brightened the colors, made other sizes, and marketed them under the name ‘Zippo’, selling them in the 1925 Sears catalog for 19 cents a piece. In 1929 they went up to 21 cents - probably due to rising labor costs in China.

Adam Sandler writes and stars in the Candy Land Movie; is it a good idea?

Will this man...

I don’t know if you have been keeping up with the progress on Hasbro’s Candy Land movie but a mention in this Sunday’s New York Times Magazine got me thinking about it.  Here is how the writer, Hope Reeves describes it:

Candy Land, a game of minimal reading and counting skills, may be following Battleship to the big screen. Adam Sandler is currently attached. No word on whether the “Big Daddy” star will play King Kandy, but not everyone is sweet on the idea. “Mining decades-old board games for movie ideas reeks of bottom-of-the-barrel desperation,” says Vic Holtreman, editor in chief of screenrant.com.

...play this man?

Ouch, that was not kind.  So, I decided to do a little research and found that Sandler is also helping to write the movie, making him part of the third team to attempt it.  Originally the movie was to be written by Etan Cohen (“Tropic Thunder,” Madagascar 2” and “Men In Black 3).  That movie was to be

Robots; Gort, Bender, Tik-Tok and my mea culpa

GORT

I was at dinner with friends last night when I brought up the subject of robots in movies and literature.   As I did so, the gentleman to my left turned to me and said:

"Klaatu barada nikto"

These were the words spoken to the robot Gort in the classic 1950’s movie “The Day the Earth Stood Still.”  I was, to say the least, dumbfounded that anyone would actually remember Gort much less those words (talk about arcane).  I responded with “You remember Gort?”  At which point everyone at the table responded with an affirmation. 

As I heard this response, I thought of all of you who wrote me and gently took me to task for leaving Gort out of my Top 10 List of Famous Robots ( The Greatest Fictional Robots of all Time; Terminator, AWSOM-O and more and Part II: The Greatest Fictional Robots of all Time). 

So, to make amends to all of you (and that means you, you Gort lovers, I am adding Gort plus 4 more famous robots that I was remiss in leaving out of my original tally.

Tik-Tok of Oz

This one surprised even me as I am a big fan of the Oz series and Tik-Tok was one of my favorite characters.  He is also important in robot history, as L. Frank Baum, the author, invented the character in 1914, six years before Karel Capek invented the word “robot.”

As you would surmise by his name, Tik-Tok is a wind up robot who requires three keys:  One for speech, one for movement and one for one for thinking. 

Tom Servo

Many of you watched Mystery Science Theatre 3000 (MS3T3K) in your youth (don’t deny it) and became fans of Tom Servo, one of the robots who accompanied the human, Joel Robinson, as he was forced to watch horrible (fun kind of horrible) science fiction movies from the 1950’s.  Here is how Wikipedia describes Tom:  “Tom Servo is a red puppet that has a gumball machine… for a head, a body composed of a toy … coin bank and a toy car engine block, and a bowl-shaped hovercraft skirt …instead of legs. His arms are pair of small white ventriloquist's dummy hands on the ends of springs that are not really functional as arms…His shoulders are made from the front of an Eveready Floating Lantern.”

The show was funny and so was Tom Servo as was his robot companion “Crow T. Robot.” 

Bender

Those of you who watch Futurama are familiar with Bender, the egomaniacal, beer swilling robot with a nasty temper.  He is, in short, a semi-lovable, cigar smoking ass.  He was created by Mom's Friendly Robot Company but he is actually the brainchild of Simpson’s creator, Matt Groening. 

and finally:

R. Daneel Olivaw

 

R. Daneel Olivaw, the “R” stands for Robot, was a character which showed up in many of the novels and short stories authored by Isaac Asimov.  Asimov began writing about robots in the 1942, 22 years after

Creative and Playful Office Spaces, Happier Productive Employees

An independent 2006 U.S. Workplace Survey reported 65% of workers asked said design and layout of
their workplace is “extremely” or “very” important to them and more than 90% said the quality of their working environment affects their attitude about their work. They published Ten Tips: Creative space at the office. The NY Times article Do Happier People Work Harder? states, "Gallup estimates the cost of America’s disengagement crisis at a staggering $300 billion in lost productivity annually. When people don’t care about their jobs or their employers, they don’t show up consistently, they produce less, or their work quality suffers." Employers and employees spend most of their waking hours at work, it should be in spaces that lift one's spirit, not drag down.

Bob Wann, President of Patch Products, said that his first move as President was to have the offices redecorated in a more playful way to reflect what they did as a company. Radio Flyer has a giant wagon out front and fun wall murals inside. Hasbro has Mr. Potato Head welcoming visitors and workers. Crayola has crayons tumbling from their rooftop. IDEO is known for their creative work/play spaces.

I’ve been collecting creative, cool and functional products and ideas for office spaces and posting to pinterest http://pinterest.com/marycouzin/creative-fun-office-ideas/. What are some of your favorite playful creative company decors?  Our industry of all industries should be known for their playful and creative office spaces! 

Magnets, Safety and the CPSC; an interview with Tim Szeto, CEO of Nano Magnetics

The CPSC took the unusual move last month of issuing an “administrative complaint” which sought to force some toy companies to recall rare earth magnet based toys that were designed and specified for adult end users (“Important! Should the CPSC Ban Adult Desk Top Toys That Might Harm Children?”).  The case will be brought before an administrative law judge. 

The magnets were deemed dangerous for children even though they were intended for adults. I found it worrisome that a toy, designed for adult end use, could be recalled.  What would happen if we were to remove all items from the market that were potentially dangerous for children (medicine, matches, knives and on and on)?

In order to learn more, I contacted Tim Szeto a new venture business developer who specializes in product development, marketing strategy and branding. He’s the driving force behind the vision and culture of Nano Magnetics Ltd.  With over 10-years’ experience in marketing, he is currently a director of a number of international venture companies.  

Here is my interview with Tim:

Richard:

The CPSC recently issued an “Administrative Complaint” forcing 13 manufacturers to recall their products from the marketplace due to concerns over rare earth magnets.   This is pretty rare.  Was your company one of the 13 and can you tell us why the concern on the part of the CPSC?

Tim:

The “Administrative Complaint” forced 2 of the 15 importers to recall their products because they did not agree to stop selling in the US while the CPSC conducted their investigation.  We were part of the 13 companies that agreed to stop and are working with the CPSC to come up with a solution.

We haven’t officially announced it yet, but we’ve come up with an updated version of Nanodots that uses a taste deterrent called AversiveTech. We created it based on the two main concerns of the CPSC, 1) infants mouthing and 1) teens using it as piercings. AversiveTech contains a bitter coating that will helps stop both risk types, while maintaining Nanodots as a constructor tool for adults.

Richard:

Can you tell us a bit about rare earth magnets and how they differ from what we remember as kids?

Tim:

Rare earth magnets are generally stronger than other magnets - in fact, it’s the strongest permanent magnet material available.  They were once rather expensive and not very common, but today, virtually all the magnets found in devices, clothing, accessories and toys are rare earth. 

Magnets were a big part of my childhood.  It’s the only natural invisible force that we can manipulate.  It was a lot like playing with magic, and still is!  My favorite magnets were the round, cylinder fridge that you can find on the back of common fridge magnets.  I would take them everywhere; they were incredibly fascinating and fun!

Sadly, the CPSC is proposing new rules that would ban almost all magnets, even the ones we grew up with.  The only ones allowed would be the flexible, thin fridge magnets (the ones that are barely magnetic at all) and magnets that are larger than 2.5 inches in diameter - something about the size of a golf ball.  I don’t know about you, but I’ve never come across any magnets that large. If you look up large magnets online, you’ll discover a myriad of articles about how people had their hands pulverized from large magnets colliding accidentally.  I can’t see how those would be any safer!

Richard:

There are many products that can be dangerous in the hands of unsupervised children:  Hot Dogs are

Taking the Anxt Out of Xmas; Toys R Us Offers “Hot Toy Reservations”

This the third in a series of aricles on Toys R Us.  Last week, in short order, Jerry Storch endorsed the future of big box retailing, the comany debuted its “tabeo” tablet and announced its new “Hot Toy Reservations” policy.  By making these moves, Toys R Us has chosen to be a thought and product leader.  In the two previous pieces, "Jerry Storch Stands Up for Big Box Retailing" and "Toys R Us Launches tabeo; competes with “Meep”, “Lexibook Junior” and “Kurio'” I reviewed Mr. Storch's speech and raised questions about the  tabeo.  In this article, I want to discuss the reservation system, what it might mean for consumers and whether it is indeed a differentiator for Toys R Us. 

If you work in the toy business you have certainly had the tirelsome experience of people endlessly asking you: "What are the hot toys this year?"  Why are they so interested?  Some of it probably just an attempt to make conversation but much of it derives from the anxiety of making sure their child or grandchild gets the toys they want.

This tendency creates a great deal of anxiety.  Apparently, there is nothing more frightening to a parent than their child feeling disappointed at Chanukah or Christmas.

Toys R Us intends to do something for all of those parents through its just announced  “Hot Toy Reservations” program.  Here is how the Christian Science Monitor describes the process in its article,

Toys R Us Launches “tabeo”; competes with “Meep”, “Lexibook Junior” and “Kurio”

Toys r Us started its 4^th quarter a little early last week by blasting its way into the news.  The combination of a speech by Jerry Storch, CEO, defending big box retailing; the announcement of a “Hot Toy Reservation Policy” and the launch of the “tabeo” tablet were designed to demand attention from the nation’ media; it worked.

In my last posting I commented on Mr. Storch’s speech about Big Box retailing (See: “Toys R Us; Jerry Storch Stands up for Big Box Retailing”).  In this posting I want to look at the significance of Toys R Us’s decision to enter the tablet market via its “tabeo” tablet. 

The “tabeo”, available only at Toys R Us, is designed for children, containing both kid based content and safety features.  It will retail for $149.99 and comes with 50 free apps.  There are an additional 7,000 apps available covering everything from educational to reading to entertainment.  

In coming out with “tabeo”, Toys R Us will be competing with Technosource’s Kurio, Lexibook Junior and the Meep from Oregon Scientific.  All of these are currently available from Toys R Us.  All

Retail Conundrum - Looking Up?

Technology in our day-to-day lives is used to entertain, free up our time, improve productivity, and otherwise assist us. But technology, more than serving us, is changing us.

I read recently that some retailers are not stocking product above eye level, because consumers no longer look up, so used as we are now to looking down at the handheld devices in our hands. Really? We are no longer looking up? What is the implication of that?

Toys R Us; Jerry Storch Stands Up for Big Box Retailing

This was a big week for Toys R Us.  Jerry Storch, CEO of the company, defended big box retailing; the company announced a new hot toy reservation policy and it debuted its new “tabeo” tablet for children.  All of these deserve closer examination so this week I am going to take a look at each of these events in three separate postings.  Let’s start with Jerry Storch’s defense of big box retailing.

The first thing to note is that Mr. Storch felt compelled to defend big box retailing.  That in itself demonstrates the impact that ecommerce has had on the perception of bricks and mortar commerce as a business model in decline.  A MarketWatch article, “Toys “R” Us defends its big-box position,” quotes Storch as saying “’I’m frustrated’ when people said the Internet is going to write off the need for big-box retailers such as Toys “R” Us and that the future belongs to the Internet space only’, he said.  “Internet changes everything, but it doesn’t replace everything,’ he added.”

Is he right; I think he is about Toys R Us specifically but not about big box retailing in general.  The latter is in big trouble. 

Remember, the Internet has to take just enough of a chain’s business so that it can no longer support its costs.  A 100,000 square foot store needs to generate a certain amount of revenue and profit to justify its size.  What it declines below that figure the store needs to either reduce its size or close.

 Amazon and other ecommerce providers are steadily eating away at the brick and mortar market share and there is more bad news on the horizon.  As I have noted in earlier articles, this rising generation of adults has lost its romance for the road.  Teens put off getting drivers licenses and adults in their 20’s and 30’s drive less than their older motorists.  In fact, according to a New York Times article by Amy Chozick, “As Young Lose Interest in Cars, G.M. Turns to MTV for Help;”  “forty-six percent of drivers aged 18 to 24 said they would choose Internet access over owning a car…” (See “General Motors, MTV and the Drive to Get More Kids to Drive”).

Bottom line:  Those who don’t drive don’t go to bricks and mortar retailers.  Why do that when they can order from the comfort of their own home?

Wal-Mart, Kmart and many other big box chains are particularly vulnerable as much of what they

Video Game Stores Are Starting to Carry More Toys: An Opportunity for Toy Companies?

The Video Game industry, once the bane and envy of the toy industry, continues a free-fall that is looking less cyclical and more like a permanent downturn (- 20% in August).  How does a video game retailer make up those lost dollars; it turns to toys?

That at least according to a very interesting article by Toy News entitled, “Video Game Indies Turn to Toys.”  It appears that, in the UK from which Toy News originates, independent video game retailers have turned to traditional toys as a means of supplementing revenue and profits.

Here is how author Dominic Sacco puts it, “In the search for higher margins, several respected names in the worlds of both High Street and online games retail have begun stocking toys and gadgets over the past 12 months.”  (By the way, High Street is the UK’s name for America’s Main Street).

I respect Toy Book for looking into this phenomenon but was not able to find corroboration that this is happening in the US.  If you sell to or knowledgeable about the video game retail industry, please let us know your thoughts.

 

 

A Longshoreman’s Strike; How Concerned Should the Toy Industry Be?

The TIA is monitoring a potential strike by East and Gulf Coast Longshoremen.  The strike, if negotiations fail, would begin October 1. 

The TIA is doing a good job by monitoring the situation.  It would seem, however, unlikely that most toy industry members would be affected.  The great percentages of toys, as we all know, are manufactured in China.  Those goods generally arrive through the west coast ports and particularly the Port of Long Beach, California. 

East coast companies who import from China tend to take their goods into Long Beach as well.  Why, because the Panama Canal is too small for the largest container ships and it’s a long way around the tip of South America.  So it is quicker to ship them overland once they hit the west coast.  Those companies who do pull in through the east coast ports should be able to reroute through the west coast. 

Who should be concerned are those retailers who sell toys that are made in Europe or South and Central America.  They are a minority of toy imports but a long strike could cause them a great deal of pain.

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A Robot Cheetah that is faster than Usain Bolt

Yes, you read that right.  Boston Dynamics has created a robotic Cheetah that has been clocked at 28.3 miles per hour.  That according to a WebProNews article by Josh Wolford.  His title says it all:  “This Robot Runs Faster than Usain Bolt, Severs All Hope for Humanity.” (Bolt’s top speed equates to 27.29 mph). 

Under Moore’s Echo that Cheetah robot should throw off some cool technology for toys in just a few years.  Now that would be a toy.

If you find this hard to believe, take a look. 

 

 

littleBits; is it “the Lego of the future?”

I rarely write about individual companies, and when I do, its because I think they are on to something big and new.  That's why today, I am asking the question:  Have you heard about the New York based company, littleBits? 

If not, maybe you better.  Why, well for starters, they just received $3.65 million in funding.  In addition, the founder, Ayah Bdeir, spoke at a Ted Conference, the Museum of Modern Art has purchased their work and Popular Science gave them a Best of Toy Fair award last year.  But most of all because littleBits allows anyone to be an inventor.  In short, they inhabit that expanding synapse between what is a toy and what is a tool.

Here is how Rich Brown, writing in CNET, describes the company:  “littleBits kits are made up of a series of electronic modules that connect together with magnets, with a color-coding system to guide assembly. Each module performs a different function, providing power, sensing an input, or generating some kind of output (light, motion, etc.). Assemble the kits into circuits, connect the custom 9-volt battery to power it, and you have a rudimentary electronic device.”

Here is how they describe their system”  ” Just as LEGOs™ allow you to create complex structures with

Keeping up with Yesterday; Amazon, Silicon Valley and Kickstarter are Changing the Way We Live

The future used to seem like something that occurred decades away.  Now, it feels like it already happened. 

Case in point:  While we have all been enjoying the apps that have been flooding the market, an entire network has grown to create radically new hardware at increasingly lower prices that will dramatically change our lives.

The confluence of 3D printing; new forms of capital raising; former Apple employees migrating to startups and lower barriers to entry at retail have created an explosive environment for new product development.  We are not talking about apps and other forms of software.  We are talking about hardware.

Nick Bilton and John Markoff have written a very nice piece for the New York Times entitled “A Hardware Renaissance in Silicon Valley.”  Here is how they open their article:  “In recent years, Silicon Valley seems to have forgotten about silicon. It’s been about dot-coms, Web advertising, social networking and apps for smartphones.   But there are signs here that hardware is becoming the new software.”

Why is this happening; because “…any designer now has the ability to quickly experiment with new product designs using low-cost 3-D printers. Products can be made quickly in contract assembly

Hong Kong in January; Looking like a Buyer’s Market

January in Hong Kong is where the rubber hits the road when it comes to toy buying.  Those buyers attending this year's Hong Kong Toys and Games Fair on the Hong Kong island or working the toy district in Kowloon should enjoy the experience.  It looks like this year, unlike the last few, that retailers should find it to be a buyer's market. 

Here is why I say that:  Global Sources , a research and sourcing service for trading partners,  sent me a very interesting survey they conducted on how Chinese exporters see the rest of 2012.  The title of the article accompanying the survey says a great deal:  “Survey: China suppliers cautiously optimistic about export growth."  After reviewing it, my sense is that it should be a good year for buyers. 

It should be noted that the survey was not just for toys but for all consumer products.  What struck me as most significant was that exporters expressed concerns about a combination of softer exports to the US and Europe and increasing costs.  As a result, there is price competition and that means that buyers visiting Hong Kong this year may find that suppliers are more willing to negotiate.   

Don't Be Afraid . . .

I recently took my son to a client meeting in New York City. The toy company rep we met with relayed to me and my son the story of how he got into the toy business.

When Mr. X (names have been changed to protect the innocent!) was fresh out of high school, he was hired by one of the large, now defunct, well-known giftware companies. On his second day there the owner left for an extended period of time, most likely for the Orient. The second-in-command called the team together and explained that of the one hundred projects currently in progress, the most they could get finished by the time the owner returned was thirty. Mr. X, not knowing better, spoke up from the back of the room, "Let's do all of them."

Toys of the Future? Quantum-Dot Technology

Whatever is cutting edge technology will be a toy in the near future.  That according to Moore’s Echo.  So, let’s consider the advent of Quantum-dot technology.  Ever heard of it; neither had I?  Reader Richard Cocca, however, had and he brought me up to date.  

Essentially, Quantum-dot technology is purported to be the latest in the historic progression of television from the early cathode rays to LED’s and LCD’s to Organic light emitting diodes.  The screen is made up of Quantum dots which allow for thinner, smaller, cheaper and more flexible screens that can be used on mobile devices.  An article in Digital Trends reports that Sony, Nanoco, Samsung, LG and Sharp are all working on Quantum-dot television QD-TV.  

Here is how an article in The Telegraph, “Forget 3D, here comes the QD TV,” puts it:  “The tiny crystals, which are 100,000 times smaller than the width of a human hair, can be printed onto flexible plastic sheets to produce a paper-thin display that can be easily carried around, or even onto wallpaper to create giant room-size screens…"The real advantage provided by quantum dots, however, is that they can be printed on to a plastic sheet that can rolled up.”

"Printed on plastic sheets that can be rolled up."  Can you imagine the toys that can be made with this kind of technology? 

KB and Bain Capital

This is the last of a three part series on Bain Capital.  Some have questioned the need for me to write about Bain.  My response is in the form of a question:  Why should the toy industry be the only segment of the population not discussing a major toy retailer that has become an issue in the election? 

Rather than just looking at KB Toys, however, I think it is more important to consider Bain Capital as a major player in the toy industry for over 10 years.    Owing the number 1 (Toys R Us) and having owned the number 2 (KB Toys) toy chains certainly makes it a rival to Wal-Mart in shaping the toy markets.  It seems to me a fair question to ask is:  Has Bain Capital been good for the toy industry?  Has the toy industry been good for Bain Capital? 

In my last posting, “Bain Capital and Toys R Us,” we took a look at Toys R Us.  In this article we look at KB Toys.

Analyzing the relationship between KB and Bain is a challenge.  Any strong emotions that may have previously existed have been exacerbated by an election in which Venture Capital companies like Bain have become an issue.  In addition, between the two bankruptcies, a lot of people lost jobs (6400 between the two bankruptcies) and many companies lost money.  This in turn creates strong feelings.

Some of you have been in the toy industry long enough to remember when KB (Kay-Bee) was a major player in the toy industry with some of the sharpest people and toughest negotiators in the business (if you ever called on KB you know what I mean); as good as they were, times passed them by. 

KB was purchased by Bain in 2000.  The company subsequently filed for bankruptcy in 2004 and was purchased out of bankruptcy by Prentice Capital Management in 2005.  KB ceased to exist in 2008.  

What complicates all of this is that there are a number of variables involved in KB’s ultimate demise:

The business model

Some question whether KB’s business model was still viable.  Here is how Obit magazine described the company’s demise in 2008:

The growth and expansion of Wal-Mart offered the latest toys at deep discounts … Toys “R” Us …emerged stronger than ever [and] simultaneously, grocery stores, drug chains and mid-tier retailers like Target and Kohl’s also became players in the business. KB, averaging a minuscule 1,300 square foot per store, couldn’t compete on price or selection…As mall traffic has dwindled and the economy sunk deeper into recession, the toy industry has been more resilient than most. But it still is an item-driven business, powered by the specific requests and interests of children and not just by price. That wasn’t’ KB’s business model. They were ultimately overwhelmed by too many factors from size of stores to ability to stock goods to new economic realities…

The debt load

Bain’s style was to pay little in the way of cash and borrow the rest.  In the case of KB, Bain paid $18 million in cash and borrowed $302 million.  According to The New York Times “Just 16 months later, the toy company borrowed more to pay Bain and its investors an $85 million dividend.”  Some feel that it was this debt load that led to the  subsequent 2004 bankruptcy. 

KB was leaner and meaner

Others feel that Bain made good moves by closing underperforming stores and letting employees

Bain Capital and Toys R Us

In my last posting, “KB, Bain Capital and Romney; toys and politics,” I talked about Bain Capital, one of, if not the most powerful players in the toy industry.  Bain has been in the news due to its owning KB Toys when that company filed bankruptcy in 2008. Mitt Romney is closely associated with Bain (he is a founder) so the company has become part of the political sparring that has been going on in the Presidential election.

Bain is a far bigger player in the toy industry than many of us may realize.  Through its ownership of KB Toys (at one time the number 2 toy store chain) and Toys R Us (the number 1 toy store chain) it has played a dominating roll in toy retailing.  My question is:  Has Bain Capital been good for the toy industry and has the toy industry been good for Bain Capital?

In this posting, we take a look at Toys R Us.  Here is what Hoovers, a D&B company, has to say about Bain’s stewardship of Toys R Us:

[U]nder [Jerry] Storch … Toys "R" Us made a concerted effort to clean up its stores, reduce clutter to make shopping easier and more enjoyable. He has met with some success winning back market share from discounters… To that end, Storch has focused on making Toys "R" Us a leaner, more efficient retailer. The toy seller has emphasized customer service and stocked up on top-selling and proprietary… He has, among other things, made the stores far better places to shop.  

That rings true for me.  Toys R Us is a far better toy retailer than it was prior to the Bain takeover.  Stores are cleaner and better stocked and the product mix seems richer.  The only major concern is the debt burden that was reported by Hoovers to be $5.1 billion dollars as of January 28, 2012.

So, has Bain been good for the toy industry in terms of Toys R Us?  I think we can give it a qualified “yes.”  But how good has Toys R Us been for Bain?

From all appearances, Bain seems to have miscalculated as its plan for a public offering of Toys R Us stock, first announced in 2010, continues to be delayed.  Bain, like most Venture Capital companies, saw its ownership as short term.  That has not happened as Toys R Us has had to fight

KB, Bain Capital and Romney; Toys and Politics

KB Toys was a retailer that seemed to stay around long after it was dead.  This chain of mall based toy stores struggled for years as it searched for a business model that would return it to its glory years when shopping malls were the rage and consumers had not yet become as obsessed with price. 

It appears that, like in one of those mummy movies, KB has just sat up in its grave, drawn back to our world by the 2012 election.   Mitt Romney, the Republican Presidential candidate, is one of the founders of Bain Capital, a private equity and venture capital investment company.  Bain owned KB at the time it filed its first bankruptcy in 2004.  The company came out of bankruptcy when it was purchased in 2005 by Prentice Capital Management.  It was under the ownership of the latter that the decision was made to liquidate the company in 2008. [Correction:  In an earlier version of this article I stated that Bain Capital owned KB when it filed for bankruptcy in 2008.  This was incorrect.  Bain was the owner when KB filed for bankruptcy the first time, in 2004.]

I am going to let others discuss the political implications of Bain, KB and the election.  I do think, however, that we are remiss in not analyzing the impact that Bain has had on the toy industry.  After all, Bain has owned or owns the number one and number 2 toy chains:  Toys R Us and KB.  They

Shanghai and Dallas, Traveling the Toy Highway

October is coming and it is time for me and many of you to begin our trip on the winding road that I like to call the “Toy Highway.”  It runs from Dallas and Shanghai in early October through Hong Kong, Nuremberg and New York.  Other notable stops include London, Paris, Sao Paulo, Moscow and Dubai.

Not everyone makes all of the stops on the “Toy Highway” but I can tell you that it is a fantastic (if at times wearing) experience.  I will see many of you in Dallas at the Fall Toy Preview from October 2-4.  I hope to see more of you at this year’s China Toy Expo which takes place (along with its sister shows, the China Kids Expo and the China Licensing Show) October 11-13. 

Last year was my first at the China Toy Expo and it was quite an experience.  It is unique in that it is designed for the Chinese consumer market.  As a result of that show, I began a new company, China Ready, as a go between for companies wishing to enter the Chinese consumer goods market.  My associates from China Ready and I will be on the floor.

As I have written in the past, China's drop in exports has forced it to develop its domestic markets.  That means opportunities for anyone wanting to sell their goods in China.  So, if you plan to travel the “Toy Highway” this year, plan a stop in Shanghai.  I think it will be well worth your time.

 

Business is War - the Davids and Goliaths of the Toy Industry

Life and business is full of surprises - that's part of what makes it so interesting. I recently heard from an industry veteran - now the captain of a small toy company - that contrary to what one might expect, a smaller toy company can get better pricing out of a factory than one of the majors.

This may not always be the case, perhaps, but it certainly does happen. Despite the fact that a big company will often do ten times the volume of a smaller one, the large company will still pay more for its goods because it is known to have deep pockets and can afford to pay more. Hmm.

A toy inventor of the future?

New Yorker