The Undead

It turns out that Geoffrey may not have been a giraffe after all. He may be a vampire.

By that I mean that he seems to be almost impossible to kill, short of driving a stake through his heart. Just when we think he is finally gone for good, that long neck pops up again.

The latest reincarnation appeared to be taking shape in early October, when the lenders which own the intellectual property rights of Toys “R” Us told a bankruptcy court that they had cancelled their plan to auction off those rights.

Now they have a new plan, which is to use those assets as the basis for a new company, presumably to become a major toy retailer. They expect the profits from this new venture to exceed the income they could reasonably expect from the sale of names, logos, mascots, good will, etc.

In making that argument, they point out that Toys “R” Us would have been profitable in the years leading up to its bankruptcy, had it not been for its crushing debt burden. There is a certain irony here, since that debt load is also the reason these venture capitalists own the TRU intellectual property.

Other funds controlled Toys “R” Us during the bankruptcy, lending it a great deal of money, paying themselves huge fees, and using TRU assets as collateral. Those assets included the stores themselves and the distribution centers, which separated the hard assets from the softer ones.

All that real estate is gone, along with the inventory. So, too, are the relationships that TRU had with its suppliers, notably Hasbro and Mattel, which were forced to find other channels of distribution and have surely done so by now.

Another loss was the 2018 holiday sales season, and it will be difficult even to ramp up in time for 2019. Failing that, the new entity could lose the most precious asset of any business, namely the customers.

What the new company would have are some words, images, and ideas, combined of course with some deep pockets. We all have a pretty clear understanding of the words and images, but I am very curious about the nature of those ideas.

Are we talking about a large number of small stores, or a small number of large stores? Some journalists have speculated that the idea will be some sort of hybrid retailer that tries to bring the strengths of internet and brick-and-mortar together in one place. The high-volume and trending items could be displayed in a smallish space, along with pickup or local delivery of online purchases.

Somehow that reminds me of the Sears catalog stores that were trotted out a generation back. They were supposed to combine the advantages of its legendary catalog and its huge department stores, but of course they did neither. The advantage of a catalog was that you didn’t have to leave home to shop, and the advantage of a physical store was that you could see and touch the product, and take it with you.

I went to one of the catalog stores once, in a converted bowling alley, and found a large room with a few washing machines and refrigerators against the walls and a long countertop. A couple of employees sat behind the counter, and would look things up for you if you didn’t know how to use an index. It was a “Saturday Night Live” skit waiting to happen.

Whatever the business plan turns out to be, the next generation Toys “R” Us intends to be a chain-store operation of significant size, which in itself makes it highly unusual in today’s toy market. It also makes it less interesting to me.

The President of the United States has said that he frequently eats at chain restaurants because you know exactly what you’re going to get. I guess that goes to show how very different he and I are, as if I needed any further evidence.

I rarely eat at any type of chain restaurant, for the exact same reason. You know what you’re going to get, and I prefer to take a chance on a local place that may surprise me, even though the surprise could be to the downside.

I’m not religious about it. I’ll eat a McSomething at an airport McDonald’s during a layover, and there are some upscale chain restaurants that I have patronized more than once.

Some of them are remarkably good, and I can understand why you would choose one if you were, say, taking an important client to dinner and didn’t want the risk of having a bad experience. As you know, that word is now considered the key to the survival of brick-and-mortar retail.

The “experience” at these places is entirely artificial, like the experience at Downtown Disney. That’s not to say it isn’t engaging, enjoyable, entertaining, or even realistic, but if you want to eat at an authentic Italian restaurant, you’ll need to go to Italy.

Personally, I’m good with an Italian-American restaurant, and I would prefer that its Old World touches reflect the background of its owners, rather than an artist’s rendition of a village in Tuscany. There is a new place in my hometown, for example, where the family strolls around singing Italian songs, and I don’t think they learned them as part of the business plan. (The food is great, by the way.)

How the public experiences a restaurant, or a toy store, is largely determined by the employees, so they should be a critical element in any effort to launch a new version of Toys “R” Us. You may have noticed that I did not mention the employees of the former TRU when discussing the disposition of assets, though many of those employees are still available. There is a suspicion among them that the new company will go with inexperienced workers in order to keep costs down.

I think that the biggest problem for the next Toys “R” Us, just like any other chain retailer, is that there is no relationship between the ownership and the staff. The next time you eat at a chain restaurant, ask your waiter who owns the business. Is it publicly traded, or is it a person, a family, a group of investors or another company?

Chances are he or she won’t have the slightest idea. Ask the same question at a locally owned establishment and you’ll get a far different answer. The staff doesn’t just know the owner, they know what the owner expects of the employees, and they know that the success of the business depends upon it.

That’s why independent retailers have survived in the 21st century, and are likely to survive in the 22nd.

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