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Saturday, November 27, 2021

One of the conspicuous developments of the Walmart-ization of America has been the clobbering of toy retailers. The world’s largest retailer has been able to discount toy prices so deep that former stalwarts like FAO Schwarz and KB Toys have been driven to bankruptcy and market retrenchment. Even Toys R Us is looking to ditch its namesake toystore business in the face of the superstore competition.

So what makes upstart toy seller Toyopia think it can flow against the tide? It’s banking on filling a niche in a mall-retail environment, as well as an exacting revenue-flow model.

“The malls want us,” [Toyopia founder and CEO Alex Reece] said recently. “They understand they are competing against Wal-Mart and toy stores bring people to the mall. A mall without a toy store is like a person without a leg.”

I share that sentiment. Over the past year, with friends producing offspring, I’ve had reason to buy a few gift toys. Frankly, Target and the like tend to not have a very big selection, which negates the price breaks they offer. My natural inclination would be to hit the malls. In one instance, I was stunned to make a trip to the nearest mall to me and find that it no longer had a toy store — the one that had been there was replaced by a candy shop.

And that’s got a degree of irony to it, since candy is the secret ingredient in Toyopia’s business model:

“We’ll have the same price or better than Wal-Mart,” [Reece] said. “And the reason we can do that is candy. Candy makes up 40 percent of our sales and the markup on it is 400 to 500 percent. Everything else takes care of itself.”

Interesting. In essence, the toys become loss leaders (or near enough) in a retail establishment that specializes in them! It’s reminiscent of what bookstores, which are increasingly adding movie and music products on their shelves, are doing.

Counting on kids’ sweet tooths seems iffy to me. There’ll always be a market for it, but enough to sustain this sort of business, based on incidental sales? Every year nutritional news knocks the overconsumption of junk food for kids, and at some point that’s going to dent product sales. Plus, the discounters and grocery stores can undercut Toyopia on candy prices easily.

I think the role of filling in a blank spot in mall store rosters is really what the company has going for it right now. Naturally, just getting that retail space doesn’t mean much unless the stores actually produce sales.

One thing that needs a remedy: Toyopia’s online presence. “eToyopia.com” ain’t gonna cut it; it’s not the name of the store, and no one’s going to remember to add that oh-so-1997 “e” to the beginning of the URL. If they really want to make a serious go of it, they need to buy Toyopia.com from the company that’s currently using it as a redirect.

by Costa Tsiokos, Sat 11/27/2004 07:56:32 PM
Category: Business
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4 Feedbacks
  1. Don’t write off the appeal of the candy as a draw. I used to visit the FAO Schwarz in NYC quite often when I was up there on business and the busiest part of the store was the candy section they had which was crammed with an amazing section of sweet novelties. Once when my daughter came with me that was where she wanted to go to spend her allowance money. The lines at the cash registers were always crammed with kids and parents.

    Comment by Tim — 11/29/2004 @ 11:23:01 AM

  2. The power of candy… I don’t suppose we’ll ever get so health-conscious that candy will go completely out of style, especially among kids.

    Then again, it wasn’t enough to save FAO Schwarz…

    Comment by CT — 11/29/2004 @ 05:05:31 PM

  3. I have read your review on TOYOPIA with great interest. You seem to believe that Alex Reece is the great white hope for the toy industry. I do not think so, based upon my personal experience operating a small doll distribution company, The Doll Factory, Inc., located in West Palm Beach, Florida.

    We were approached by Toyopia last June in regard to providing our dolls for their stores. Based upon the Toyopia hype and 2 solid credit references, we offered them a $1200 credit line to start, along with “net 30 days” terms. We shipped their first order on July 2nd, in the amount of $1116.00 plus freight, and still cannot get paid, 167 days later. Despite many calls to Toyopia, and messages for Alex Reece to call back, the amount is obviously uncollectable. It is our intention to file suit against them at this time.

    A visit to their new Wellington store showed our product in stock, at a retail price of $54.95 against a $29.95 list price. This item cost them $15.00, and included 20% additional discount in the form of free merchandise. Toyopia is having a big 50% off everything sale going on, but it is obvious that this is not a legitimate price on the merchandise offered.

    I suggest you investigate Toyopia more carefully. It would not surprise me to see them disappear from many locations immediately after Christmas.

    If you need further information, please contact me.

    Gary Hedrick, Pres.
    The Doll Factory, Inc.
    260 Business Park Way #B
    Royal Palm Beach, FL 33411
    Tel: (561)795-8777
    Fax: (561)795-3450

    Comment by Gary Hedrick, Pres. The Doll Factory, Inc. — 12/16/2004 @ 01:29:46 PM

  4. Thanks for sharing your less-than-inspiring experience with Toyopia. Hopefully your situation will be resolved.

    For the record, I never held the opinion that Toyopia was a savior. The way I see it, they’re a small startup that’s doing well because of the current industry shakeup. If it’s managed right, they have a chance to grow into something significant; but it’s tough for any startup, and they wouldn’t be the first one to tank. If anything, I’m skeptical about the reliance on candy sales to drive their engine.

    Comment by CT — 12/16/2004 @ 01:58:09 PM

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