Hope one pops up in one of my local malls. Mainly cause one has a TRU nearby, and I enjoy the irony in the thought of a KB having a location in a building that used to be a competitor’s store.
We don't know. We'll have to wait and see. Any availability is better than Wal-Mart availability. Sometimes Wal-Mart doesn't stock period... But did it have to dump some excess cargo? Even the random derogatory comment towards women that had no rhyme or reason to be there? This part was exciting to me: " Of special interest to collector communities, a dedicated “Toy Nerd” in each store will help buyers with in-store hot off the delivery truck purchases, along with events like meet and greet autograph sessions with toy designers." That sounds kind of awesome. The return of KB Toys is getting better and better and making me more excited!!!
Yes, new structures are going up and business flocks to them but there are other angles to consider. 1. What's happening to the old structures? Here in PA, there's a distinct pattern of mall abandonment. Developers/stores get tax breaks to build somewhere and then move on when they expire. After that happens, they look like a jigsaw puzzle with missing pieces. I remember walking through the Richland mall in Johnstown a couple years after the Galleria mall opened. The anchor stores were a KMart and a Walmart, with everything in between boarded up. Of course, that's Johnstown and they never recovered from the flood back in the late 1970s. But even out in the Harrisburg area, we have some sad malls on life support and vacant storefronts all over. 2. How many of those "new" businesses are chains? I don't think an area that can support yet another McDonalds or Target is as economically healthy as one that can support a more independent business that doesn't have nationwide logistics to lean on. People think every location is profitable, which actually isn't true. Some of them exist to hold mindshare and stifle competition, subsidized by other profitable locations. As I will get into below, a new business is on the clock to get profitable before the loan is spent and that is _much_ harder with a name brand store, crappy or not, siphoning off traffic. 3. How many of them are around in a year? This is what concerns me. I had entertained opening my own shop because distribution has been terrible here since the late 1990s (people complaining now are just getting a taste of that). So I did the research on rent, small business financing, wholesale programs, the works. What I found was that SBA loans usually cover about six months of rent. Incidentally, lots of businesses limp through 5-7 months and disappear. There are places in my hometown that have had 6-8 businesses, plus vacant periods between them, since I started operating (as a convention dealer because I couldn't afford commercial rent 9X my mortgage) in 2012. Some of these businesses did not last through their second month. When Radio Shack went through its first round of closures, I looked into renting the local spot. $8K per month plus utilities and insurance. This is a strip mall anchored by a KMart and a grocery store, not some upscale indoor mall with banks and jewelers. You have to sell an awful lot of toys to make that payment. With my situation at the time, I would've had to sell through my whole SBA loan's worth of inventory each month to keep afloat. What was the number I used to quote, 4000 Batman figures? I literally could not have afforded to subsidize a single bad month with my regular paycheck. So I kept up with conventions. The office/shopping complex where I spent the better part of my real career would've collapsed without the government's steady checks too. The situation with my day job was starting to get desperate (five years with no COLA sucks) so I was considering running a shop over my lunch hour and evenings. Now this place was a little more upscale...emphasis on the "was." Most everything's moved out except the food court. The camera shop's gone, the shipping/printing shop's gone, the restaurants are gone, the banks are gone, etc. Hallmark ate B Dalton, Verizon took over the news stand as T-Mobile bailed, flower shop's a vaping lounge nobody ever seems to be in, the women's clothing shop turned into a day care (ask a parent how expensive day care is), etc. They briefly had a web design body shop where they pay you $15/hour and charge the government $325/hour but that turned into a Rite Aid when they vacated the building across the street. Most of the vacancies were bricked over or had their windows tinted super dark so you couldn't see inside. Anyway, that place wanted $18K per month for a spot that was about the size of my garage. Obviously, I passed. They did actually had a comic store for awhile though. It moved in where the news stand used to be. I stopped in once and my immediate impression was that they simply did not have enough inventory to make rent. That place was open about 2-3 months before sports memorabilia started creeping in. Sports memorabilia is overpriced junk. Not subjectively, objectively, cheap "chromed" plastic or a Topps card glued to glossed up scraps of particle board with an asking price of $50 and up. It had taken over almost the entire sales floor by the time the 5th month's rent came due and everything cleared out. Even if you were getting your Marvel Selects for free, you'd still have to sell a ridiculous number (over 800) just to keep up with rent. The only way I could find to get my head above water after five years was to flip clearance items. I don't think that really scales to the level of even a regional chain. Unless you want to be Ollies. Is the random stuff dumped at Ollies really what anybody is visualizing here? 4. And here's something else to think about. Why haven't most of the successful online shops branched out to physical retail? I know A3U had two in Canada years ago (and I distinctly remember at least one of them closing) and I want to say Toy Dojo or Chosen Prime has one now. As much money as I was spending at BBTS as retail choices dwindled, I would've thought they'd have done something by now. At least until I tried to do it and saw what a vertical climb it would be. The value proposition likely isn't there. If it helps to say "yeah, R, you're just bad at business," well, that's your prerogative. But people that _are_ business minded are looking very hard at whether or not the market can support such an endeavor with a desirable return on the investment. That almost certainly means you'll end up driving to a major metro area for a limited number of starter stores. And if they don't perform to expectations, they'll disappear as suddenly as they showed up.
Putting in a “toy nerd” is a fantastic idea. This sounds like KB is going to try to run their store similar to how game stores operate.
Excellent (and thorough) analysis! Very good read, thanks! All that said, any idea WHY the rent is so high? I knew exactly what you were talking about BEFORE you even mentioned the high rent. Every time I see a big store boarded up (i.e. Meijer, Kmart, etc.), I ALWAYS see a real estate rental sign. FOR MONTHS. YEARS. At some point, one figures, they would drop the rent enough to allow SOMEONE to take the space. And I get the counterargument: rent is high because the land taxes/upkeep costs are high. Fine, let's go with that. How much rent does a landlord make if he sets the rent rate TOO HIGH? 80%? 40%? Cause from my limited point of view, I see non-rented land as making ZERO dollars per month. So it seems (to me) like the retail problem has 2 big hurdles: 1) Amazon kills all local business (in a way that people used to criticize WALMART for doing! Oh no, Amazon is much worse!), 2) Business rent is idiotically high because the people renting the space are clearly IDIOTS. Another solution I've seen is when the landlord/owner will split up an old anchor store and create a new strip mall. I guess the idea there is to charge less to more shop owners. But this investment into an old retail space seldom happens - a local mall that's been dead since I was a kid is only NOW starting to get revived as a new outdoor mall (and construction has been happening for over a year now). I don't get it. Why not offer low rent for the first (crucial) months of a business?
From my understanding, these KB shops will be EVERYWHERE. They're looking to test each market, so if not your "local" mall, then probably another mall near you. It really is a sound plan to open these shops temporarily as pop-up stores - most of the toy revenue is from Xmas anyways, so it's rather counter-intuitive to have a toy shop for the other 75% of the year...
With malls specifically, many of them are foreign owned. Swiss and, increasingly, Chinese holding companies. It's basically out of sight out of mind. Have you ever seen that graph of what people think the wealth gap is versus what it actually is? I think people think these holding companies own 20 properties and notice when one's not producing. It's more like they own hundreds or thousands. Even if they do notice, there's a thought process that says if you lower rent for one client, everybody else is going to want their rent lowered. That hits hard when you have to _really_ lower the rent to get a property occupied. It's not like "gee, I can't afford $9000, can you lower it to $8900?" but more like it'd have to drop from $9000 to $900 for somebody to take a chance. Plus there's a perverse incentive not to produce when Uncle Sam rewards losses with tax refunds/credits. Another issue with bigger vacancies is that they're bigger. The reason I was looking for small spots was that I didn't have the inventory to fill anything bigger. I think I still have 2/3 of the toys I bought and it still wouldn't fill up a small bedroom. So by only being willing to lease these giant shells with no subdivisions, they greatly limit the pool of potential renters. It's funny because the same people that pitch a fit about the unemployed not jumping at the first job that comes along have no problem waiting for Mr Right themselves. Taxes, in comparison, are nothing. People that complain about taxes typically fall into two categories. They're either trying to shift their tax burden onto others (usually downward) and make up stories to effect that or they have no experience with them and buy the stories at face value (and end up holding the bag).
Back on topic though, I do hope KB can make it, and hundreds of stores sounds great, but I just do not expect any of them to be in this area. We lost alot of toy stores and toy aisles since the late 1980s.
Gawd damn it, Astrotrain!! I stopped using Walmart for TF purchases ages ago. I go tired of their bullshit.
I got mine from Meijer and Kroger. I rarely ever go to Walmart these days unless I'm "desperate". There are so many options.
I'm not expecting all toy dreams to come true but I'm willing to give a shake up to how we buy toys a chance. Maybe I'm just old fashioned but there is just something that isn't as fun collecting from the internet as there is to making that find in a store. As to if this plan will work or not I don't have the faintest idea. I'm the guy who had to wonder if something like a Disney Store or a Lego Store would work so I know nothing at all about retail.
And, in that same vein, I don't anticipate learning about potential locations until stores are actually being set up.
...i expect we'll see a ripe market for pop-up toy stores this holiday season, and that may likely be how the new kay-bee brand enters most markets: think like spirit halloween, but with toys to fill the empty seasonal niche...
They'll have to compete with Party City, then. Heard that Party City is looking into opening pop-up seasonal toy stores as well called "Toy City".
