On Monday, Toys “R” Us filed for bankruptcy & according to Chairman and CEO Dave Brandon, “The timing of all this could not have been worse.”
Here’s what we know so far regarding the announcement:
- Toys “R” Us filed court documents in support of the bankruptcy petition.
- The company bought itself $3.1 billion in new financing that will allow it to stock and operate all of its stores throughout Q4.
- Store closings will begin shortly after the holidays.
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Toys “R” Us is “currently performing a detailed review of their real estate portfolio” to identify store locations where the rent is too high. Representatives also indicated the long-term plan is to close these expensive store locations and shift to a smaller store structure.
“It doesn’t necessarily say they are going to close completely because they do mention a shift to smaller stores and still have a substantial digital presence,” Nancy-Lee McLaughlin, Marketplace Channel Analyst at CPC Strategy said.
“If they survive this, they may be shifting to a more niche market with a more intimate customer experience, almost like a showroom and continue to push their digital presence, similar to brands like Warby Parker.”
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Of course, anyone following recent retail trends shouldn’t be surprised to hear the news. In 2017, more than a dozen retail companies reported bankruptcies including RadioShack, The Limited, Payless, and Vitamin World (to name a few).
Although there are some brick and mortars breaking through in the face of competition (for example, Walmart, & Sephora), there’s a lot more that are closing and those numbers are increasing every year.
In contrast, Amazon’s Marketplace is thriving. They recently announced 64 billion in growth (since 2010) and now, 52% households have Amazon Prime.
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“Toys “R” Us are planning to close store locations after the Christmas season. However, last week, many of the company’s toy vendors halted shipping merchandise to the ex-toy giant, unless Toys R Us agreed to pay cash on delivery, cash in advance, or payment of all outstanding bills and consignment shipments.” McLaughlin said.
Disgruntled toy brands are now being forced to reevaluate their distribution strategy and according to our experts – Amazon is likely to be a major player in that discussion.
“The Toys “R” Us bankruptcy is final confirmation that toy brands who are not already selling on Amazon need to start looking at the channel more seriously,” she said.
What about brands who are already selling on Amazon?
According to McLaughlin, there are two Amazon features toy brands should be investing in including:
- Amazon Stores
- AMS, specifically Headline Search Ads
Amazon Storefronts is a free self-service feature that allows brand owners to design and create multiple pages to showcase their brands through videos, slideshows, text, and more. Amazon Storefronts also offers brands highly customizable pages to showcase a single or small group of products, which is perfect for new product launches.
“For brands already selling on Amazon, now is the time to start building out your Amazon Storefronts (aka Amazon Stores), firstly because Brand Pages are being done away with at the end of October, but also to provide a better shopping landscape for browsers and gift givers, as we move into Q4.” McLaughlin said.
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Headline Search Ads
In addition to Amazon Stores, you also want to make sure you investing in ad features such as Headline Search Ads.
“A good questions to ask yourself is – where did my products sit on a brick and mortar store shelf, how did browsers shop, and how can I translate that to the online shopping experience?”
Headline Search ads (now available to both vendors and 3ps) are an extremely valuable advertising placement to help drive traffic and raise product awareness.
“Another suggestion is to invest in more generic keyword searches during the holiday season. You may want to start bidding on terms like gifts for girls or toys for 5-year-old boy. These will be more expensive and at a higher ACoS, however, this is a good method to target shoppers who may otherwise be out of market or in the exploratory or browsing stage of the buyer’s journey.”
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For more on Amazon Stores or Headline Search Ads, email [email protected]