Toys 'R' Us hopes 'play labs' will boost foot traffic

NEW YORK • Mr Joshua Hightower and his wife and Amy drive 40 minutes to a Toys 'R' Us store in Wallkill, one of the farthest reaches of the New York City suburbs, so their children can try toys at an amusement area dubbed the "play lab".

"We were actually here last night and last week," said Mrs Hightower, a 30-year-old stay-at-home mum, as her daughter played house and her two sons raced cars in the play lab, which Toys 'R' Us launched in 42 of its stores this year.

"It is hard to get them away from this area."

The Hightowers may be ideal Toys 'R' Us customers, but so far there has not been enough of them. Many shoppers now make their toy purchases online.

Foot traffic at Toys 'R' Us, the largest United States toy retailer, has declined, as consumers turn to e-commerce sites such as Amazon.com, mass discount chains like Wal-Mart Stores, and some small independent toy stores.

As Toys 'R' Us aims to exit bankruptcy next year after defaulting on its debt in September, its efforts to reinvent its stores with play labs will shape how other retailers look to experiential shopping to tackle e-commerce.

The holiday shopping season, when 75 per cent of all toy sales are made, is a key test of this strategy.

Toys 'R' Us has set aside over US$400 million (S$538 million) out of its US$3.1 billion in bankruptcy loans for sprucing up its approximately 900 stores over the next three years with more experiences and better-paid staff.

The firm's creditors are wary of these plans, according to sources close to the situation who requested anonymity.

Creditors can ask the bankruptcy judge to stop Toys 'R' Us from spending on play labs or other experiential aspects, if they view the costs as excessive.

In bankruptcy court papers, Toys 'R' Us has argued that it cannot wait until it emerges from bankruptcy to invest in its stores. The retailer also plans to close unprofitable locations and improve its website and loyalty programmes.

Toys 'R' Us chief executive Dave Brandon defended the strategy in an interview, saying brick-and-mortar stores and experiential shopping were important to the retailer's brand. "We think our scale is a huge advantage, because we have a brand that's nationally and globally known."

To be sure, Toys 'R' Us may end up with little to show for its investment, industry experts said. Experiential shopping is expensive to scale up for big box retailers that rely heavily on seasonal hiring, they said.

"There is a chance that Toys 'R' Us could be out of business in the next two years entirely in the United States," said Ms Stephanie Wissink, a consumer products analyst at investment bank Jefferies.

"My fear is that they are not selling goods to a consumer that values that experience."

REUTERS

A version of this article appeared in the print edition of The Straits Times on December 22, 2017, with the headline 'Toys 'R' Us hopes 'play labs' will boost foot traffic'. Print Edition | Subscribe