Retail Profile
FAO Schwarz
FAO Schwarz : ThreeSixty Group is a company which has gone under the radar for many years. Since its acquisition of the FAO Schwarz brand several years ago, its profile – along with its presence in the global toy market – has increased exponentially. John Baulch visited the company’s Hong Kong office to find out about the company’s ambitious expansion plans from COO Jan-Eric Kloth.
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hreeSixty’s Hong Kong office is located in in Kowloon Bay, a short taxi ride away from the hub of toy company showrooms situated in TST. However, the journey is well worth it: as you enter the incredibly well-appointed office and showroom space – almost certainly the most prestigious I have ever been in – and take in the breathtaking views looking back over the bay of Hong Kong, it is impossible not to be impressed. The atmosphere of wonder that is the hallmark of the FAO Schwarz stores is perfectly replicated in this space; creating theatrical, experiential surroundings are clearly in the company’s DNA. For those who may not be familiar with the back story, ThreeSixty Group is a privately-owned company founded in 2000 which has grown into an operation with 400 staff – 300 in Asia and 100 in USA. The company designs, sources, and distributes consumer products across diverse categories under a portfolio of owned and licensed brands. Its portfolio includes more than 20 brands (internally developed, acquired, and licensed) including the iconic FAO Schwarz, Sharper Image, Wembley and Discovery brands. The brands and products are sold in over 70,000 retail doors in the US and across the world. ThreeSixty Group started life as a ‘key item’ business, with toys representing around 50% of the initial offering. The idea was to pick the best-sellers from a range of product categories to offer to retail customers. Over time, the business moved from
offering ‘off the shelf’ lines to developing its own ranges for private label. From there, it was a logical step to introduce branding, by using the company’s strength in packaging to curate the products into a cohesive branded range.
COO Jan-Eric Kloth’s first involvement with ThreeSixty Group was as an investor, and he subsequently decided to join the company to run the Asia division and to drive the international expansion, based in Hong Kong. Along the way, the company joined forces with a New York-based private equity investor, AEA Partners. Unlike many toy executives, Jan-Eric is fulsome in his praise of the partnership with the oldest private equity firm in the US: “We’re fortunate to have such a fantastic partner.
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It has enabled us to acquire such strong brands – first FAO Schwarz, then Sharper Image two years ago and recently Vornado.” FAO Schwarz had long been a fixture of the US toy scene: in 2001, it had 41 stores. It subsequently went through several owners, including a magazine publisher, a hedge fund, and from 2009 until it closed in 2014, Toys R Us. Despite its challenges, there was a strong consumer attachment to the brand - a valuable asset for a new owner to leverage. So, how did the tie-up with FAO come about? Jan-Eric takes up the story: “We had started to see the benefits of developing a brand association with an iconic toy store with a name that resonated around the world – that basically left us two choices, FAO Schwarz was the logical choice. Four years later, a deal was finally tied up with Toys R Us to take over the FAO Schwarz brand.” After acquiring the brand, ThreeSixty Group set about creating a highly giftable cross-category product line in cohesive packaging which it planned to offer to department stores. Jan-Eric explained: “We knew that many department stores were getting out of toys. We were challenged to come up with a ‘one-stop solution’ that they could buy into. We developed a range of 120 items – half toys, half Christmas items and home décor – which initially launched at Bergdorf Goodman, and subsequently found a home in every premium department store: Saks, Bloomingdales, Nordstrom and Macys amongst others. “