NEW YORK (Reuters) – Joshua and Amy Hightower drive 40 minutes to a Toys “R” Us Inc store in a blue collar neighborhood 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.”
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“We were actually here last night and last week,” said Amy Hightower, a 30-year-old stay-at-home mom 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,” she said.
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 US toy retailer, has declined, as consumers turn to e-commerce sites such as Amazon.com Inc, mass discount chains, like Wal-Mart Stores Inc, and some small independent toy stores.
As Toys “R” Us aims to exit bankruptcy in 2018 after defaulting on its debt last 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 percent of all toy sales are made, is a key test of this strategy.
Toys “R” Us has set aside more than $400 million out of its $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 company’s creditors are wary of these plans, according to sources close to the situation who requested anonymity to discuss confidential deliberations. 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 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 programs.
Dave Brandon, who became Toys “R” Us chief executive in 2015 after spearheading a turnaround at Domino’s Pizza Inc, defended the strategy in an interview, saying that bricks-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,” Brandon said.