What does the closing of Toys R Us mean for the $84 billion-a-year global toy industry?
“For us, it means sadness,” said Jay Foreman, CEO of the toy company Basic Fun!, who still maintains a resolute sense of optimism on the future of toy businesses.
“For toy manufacturers, Toys R Us is our product showroom,” said Foreman, whose Boca Raton, Fla.-based company owns Hatfield-based K’nex educational toys and several other brands. “They gave us a shot on anything we created and put it on their shelves. Losing that is pretty traumatic.”
Last week, Toys R Us president Dave Brandon announced that the bankrupt chain was shuttering or selling all of its 800 stores. The company was crushed by competition from online retailers and a disastrous 2017 Christmas retail season. It was also saddled with billions of dollars in debt brought on by an ill-conceived leveraged buyout.
A shortage of resources made for few workers on the sterile sales floors to help customers. A miserable shopping experience was hardly a positive for brand loyalty.
“I truly believe we did our best, under what turned out to be nearly impossible circumstances,” Brandon told employees.
By contrast, Foreman remains bullish about toys. Especially for the K’nex brand, which Basic Fun! purchased last month. He believes that the opportunity for growth has never been bigger.
K’nex, a construction toy used to build elaborate structures, will be insulated from the effect of Toys R Us’ closing, Foreman said. That’s because K’nex’s previous owner, a private equity company, had a falling-out with the giant retailer when it first filed for bankruptcy and stopped shipping it toys.
“Then they doubled down with Amazon,” Foreman said. K’nex aggressively added listings and increased spending on marketing. “And Amazon is now K’nex’s No. 1 account.
“With the bankruptcy liquidation, K’nex isn’t owed any money by Toys R Us,” Foreman said. “I wish I could say the same about the Basic Fun! brands.” In addition to K’nex, the brand also produces classic Lincoln Logs and Tinkertoys. Basic Fun! also owns Uncle Milton and Good Stuff toys and produces Cake Pop Cuties, Poopeez, Classic My Little Pony, and dozens of Arcade Classics Electronic Games.
Foreman said he plans to expand production at the K’nex plant in Hatfield, Montgomery County, which currently employs about 40. About a dozen people left after Basic Fun! took over, mostly from the management ranks, he said.
“We believe we have an opportunity to enhance our business with online retail,” he said. “It’s not just Amazon, but Target.com, Walmart.com and JCPenney.com, and a lot of other retailers. We could be hiring soon.”
Retail sales of all his brands at bricks-and-mortar Target and Walmart stores remain strong. “They continue to grow,” Foreman said.
“We have been seeing a dropoff at Toys R Us, other specialty retailers, and at independent retailers,” he said. “There’s fewer gift shops on Main Street U.S.A. That’s why online is important. It’s growing in leaps and bounds.”
The toy market is famously fickle. The hottest categories change every year, he said. “Right now it’s novelty collectibles — Fingerlings, LOL dolls, and construction toys like K’nex and Legos are strong. Boy action figure toys are big, especially anything related to Star Wars or Black Panther.”
Science-based toys have also become a important niche. Basic Fun! also produces the classic ant farm under the Uncle Milton brand.
Fashion dolls, a category that includes Barbie and princess toys, have made a strong comeback.
“As more kids become glued to their iPhones and tablets, parents want them to have a more traditional toy experience,” he said. “Ten or 20 years ago, parents weren’t sure if they wanted their girls to play with Barbies. Now most parents are ecstatic to see their kids play with dolls instead of playing the computer.”