Letter from America
Create your own destiny…
After 20 years working at A.C. Nielsen/D&B Research Company, Rick opened the first Learning Express Toys franchise in the Chicago area in 1996, and then became a sub-franchiser, opening nine more stores. Although leaving the corporate environment behind, he has combined his expertise in data and numbers with a passion for the toy retail space. This month, Rick concludes his trilogy of Amazon columns and looks to how independent toy retail is likely to develop.
“Success is not the result of predicting the future. It comes only when one begins to engineer the future they want.” This is a mantra that I think it is important to live by. As I stated in my previous articles, the remora fish started us on our journey to engineer a different path in retail through cooperation with the ‘whale’ of retail - Amazon. After just five years in retail, early results show promise for Learning Express; our mean sales have increased on average by 27% compared to our pre-Amazon strategy. Now, we need to consider the next 5 -10 years. What will neighbourhood stores physically look like, what services/products will be offered and how will we use Amazon services?
Before I start down the path of the future, let me provide some real-world facts as of Jan-Feb 2021 regarding my relationship with Amazon.
• Amazon is currently our 8th largest vendor.
• Shipping is immediate with free freight (we do subscribe to Prime).
• Smaller orders are imperative to be consistent with our cash flow model.
• Our markups are based not only the cost of product but on local market demand and what is trending on social media.
• Our rebate or discount dollars from large purchases are now making a real impact on our cost of goods.
• Speed and agility fit our business model so Amazon and Learning Express Toys are a good match.
Basically, our operational model is working, and working well, and I am pleased.
Looking to the future, I think the following will be key:
Here, size does matter. Currently in the US, independent toy stores range from 2500- 3500 sq. ft. I don’t expect this to change much. Those toy stores that have survived have become a treasured jewel, so rents should remain reasonable. What will change is the breakdown between shop floor space and back room activities, notably web orders and shipping (including kerbside pick-up and local delivery). The split today is roughly 80-85% showroom and 10-15% back office/storage space, but I see this changing to a 60-40 split as more room is needed for online fulfilment. Personnel make up will also change over time from predominantly sales associates to a mix of sales and operational staff. Web sales for Learning Express (currently 10% of sales) are expected to grow to 30-35% in five years, and our infrastructure will need to adapt to support this model.
A wider range of product will become necessary – not just traditionally ‘toy’ ranges - as toy stores morph to retail is likely to develop. gifting stores and trending stores. I expect the traditional toy market as we know it to see a shift to more items categorised by age group, and gifting for that age group—infant, toddler, pre-teens, teens and adults. We will all need to recalibrate our thinking of what makes up the offering of a toy store; even now, we have started to stock fashion, phone accessories, room décor and fidget toys, all of which are really aimed at teens and adults. Not forgetting games and puzzles, this sector covers an extremely wide age range to sell to. All these differing products will play right into our strategy of using Amazon as a marketer of new trends as well as a supplier of the latest products quickly.
We need to keep people coming into stores. While product may be king, the queen is the wow factor that indie toy stores must exude. It must scream kid friendly on social media, be on trend, informative, and a safe place for the local community to gather. Post-Covid, this will still mean events, play dates, demos and special in store attractions for kids, because it will be the kids that want to visit, not the parents. YouTube, TikTok, Snapchat and streaming services will all help demonstrate just how a local store exudes the Wow factor. We can put a local spin onto our marketing and ads; this will stand out amongst the big box and online only retailers. There must be many more “Toy Man Rick” and Christine “the Magic Maker” letting their personalities shine as ambassadors for the independent toy/gift market.
I will be focusing on three critical areas as we move forward with these new ideas, models and processes. The tests that I will use are as follows:
• Relationships - how will any changes affect relationships, both internally with our team and externally with customers and vendor partners? Relationships will still be a key part of our success and must be enhanced and grown. • Convenience - of all the resources our customers have access to, the most rare and valuable is time. Every change must be viewed through this lens. • Uniqueness - finding products and features that competitors lack, customers desire and will pay extra for will make us become uniquely valuable.
In closing, thank you Toy World Magazine for allowing a local toy store gent to speak to your audience so openly and hopefully with insight. I realize not everything works for everybody and I certainly do not have all the answers, but if just one thought, can help another indie, we have done good. Till next time.