Retail

Toys R Us Battles Bankruptcy With ‘Play Labs’

Struggling retailer Toys R Us tries to reset the toy-buying, brick-and-mortar consumer experience by making their physical stores more hands-on for their youngest patrons. To that end, they have opened up 42 “play labs” in stores nationwide.

It’s a move aimed at turning back the tide against online shopping, where toy sales have migrated of late, as users can more easily discover the same goods on Amazon or Walmart.com, oftentimes at a cheaper price. The eCommerce revolution has forced the retailer to file for bankruptcy protections this year, after defaulting on its debts in September — a problem the chain is committed to recovering from in 2018.

The holiday season — when 75 percent of all annual toy sales occur — is key to that strategy.

Toys R Us has set aside more than $400 million out of its $3.1 billion in bankruptcy loans to improve over 900 stores and raise the pay level and expertise of its staff.  Creditors, notably, are casting a curious eye at these plans, and there is some murmuring that those creditors might seek to stop investments in things like “play labs,” unless they can quickly boost the retailer’s bottom line.

The brand has countered that it can’t wait until it emerges from bankruptcy to invest in its stores.

“We think our scale is a huge advantage, because we have a brand that’s nationally and globally known,” Toys R Us CEO Dave Brandon said.

But experiential retail is a tough and expensive prospect to pull off, particularly for large box retailers like Toys R Us.

“There is a chance that Toys R Us could be out of business in the next two years entirely in the United States,” said Stephanie Wissink, a consumer products analyst at investment bank Jefferies LLC. “My fear is that they are not selling goods to a consumer that values that experience.”

Other toy retailers, particularly LEGO and Build-A-Bear Workshop, have both seen losses this year as well.

There is also concern that the experiential buyer might, in fact, prefer smaller or regional toy chains, which in recent years have also been cutting in on Toys R Us’ earnings. What those stores lack in scale, they make up for in unique offerings and items tailored specifically to local tastes.

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