With the news of Toys 'R' Us coming to end, it is hard to believe that a single Facebook post could shake the toy world, but it did. An entrepreneur named Ellia Kassoff stated he was going to revive KB Toys. AFJ's MJ Ortiz (the Key Master) spoke with Kassoff about his plans for KB Toys. How many stores would there? What type of store does he have in mind? Would toy collectors be recognized? He found out all this and more...
MJ Ortiz: Ever since the news dropped about KB Toys coming back, it has been viral on the Internet, everybody going nuts.
Ellia Kassoff: Trust me, I started with a little post on my FB page and within 2 days I’m getting hundreds of calls. I didn’t even do any PR until yesterday [March 19th]. Now we’re getting on CNN and Fox News. Yeah, it’s out of control.
MJ: There is so much love for that brand.
E: You know its funny you say that. I just got off the phone with one of the companies we’re looking at to help with our pop-up model and they didn't understand that. They said, ‘well why should we go with KB, we already have toy stores, we can just buy all the stuff’. They don’t get it, no one cares about any other toy store except for Toys ‘R' Us and KB, that’s it. The same thing with another large pop-up company who has 4, 5 hundred retail stores around the country. I think they were a little bit peeved that we’re getting more love in a very short amount of time by the toy industry than they are. They keep saying ‘But I don’t understand it, you know, we’re one of the top toy companies – toy stores – in the country. I’m like, but nobody knows who you are.
MJ: Unless they went there [TRU and KB] like most of the members of our community, they won't have that nostalgia, and the nostalgia factor seems to be really big.
E: Yes. I was even approached in one of the conversations, ‘would you sell the trademark and let us do it’ and I said absolutely not. I said what we [Strategic Marks, LLC] do is ensure that the experience is as close to or is exactly the same as the customer remembered it as a kid. We did it with Astro Pops and Leaf Brands. We’re the keeper of the trademark for a reason. At one point someone messed up or the company failed. We know if we can deliver an experience that the kid of 20 years ago can walk into, with their kids, and say, ‘This is awesome, this is KB'. There is no way we’re going to sell the trademark [KB Toys] because it's not just a trademark, its experience that we’re going after and that’s what we do for a living, that’s our core competency.
Now, with that said, we understand that times change, so I’m probably going to say that 80% of KB will be the same, but that 20% is going to be, for example, possibly doing a showcase store for each region, a larger format, like a Toys ‘R’ Us, where toy companies can go in and do a road show and do special events for collectors.
MJ: We love to hear this. Action Figure Junkies is a group of collectors, so you’re hitting that nostalgia bone in us with the KB name.
E: We just had some collectors asking us saying, ‘look, please help us, we don’t like buying online because the boxes could get damaged, the package could get damage, we need to buy it in a store, we need limited edition stuff, we need a lot of it.’ So, we’re also going to be getting a lot of input from the collectors. I got a call from Fox News today [Tuesday the 20th] and they said, ‘we sent you an article about the fact that there’s going to be more adults than kids, that’s why Toys ‘R Us went out of business. Because there are fewer kids out there buying toys.’ I laughed. I said, ‘That is such BS.’ They said, ‘well that’s what TRU said, that is what TRU is claiming as one of the reasons they’re going out of business.’ and I go, ‘No, they’re going out of business because Bain [Bain Capital, KKR & Co.] screwed all the money up, just like they did with KB’.
MJ: You couldn’t be more right.
E: I said, guess what? You know who is a very large toy buyer? It’s the adult toy collector, it’s a huge space. So, for them to say ‘well, you know we have fewer kids growing up today, that is why there are fewer toy purchasers’ NO! that’s not it. I said, they’re making up reasons, because the executives are who, they’re owned by, and they're still paid by the guys that own them who happens to be who, Bain, so of course they're going to say the right things. The reason why they're being liquidated is that the banks were saying that you guys haven’t brought up a strategy to go forward and you're not doing it quick enough, so we’re just going to liquidate. It’s such BS, I mean, I actually said in my interviews that Bain, those people running Bain, should be in jail because all they're doing is stealing money. They made 200 million dollars in dividends from TRU. They went out bought TRU, put 20% down, and financed the rest. They took all that debt and handed it right to TRU and said, ‘hey here’s all your debt payments, go make them’. Meanwhile, they took out 200 million when they bought TRU for their own greed. Of course, TRU had no money for their stores to revamp them, of course, their online presence sucked. If you had no money left after paying your debt payments what else are you gonna do? You're going to go on life support. The day the investment group ended up buying TRU, just like they did with KB, their days were numbered. Unfortunately, that’s what happened.
MJ: We’ve talked about it a little bit on our own site. That is of our feeling as well. The private equity guys, the second they pushed that debt back, they put the last nail in the coffin. Earlier you mentioned the trademark itself. When you did the trademark, did you purchase the trademark from TRU or had they pretty much just abandoned it at this point?
E: No, they didn’t abandon it, but all I can tell you is that we have a methodology that works to acquire trademarks legally through the trademark office. We have a legal process, but at that point, it was a live trademark with TRU.
MJ: They didn’t squeeze you? You didn’t have to deal with them? You just went through the legal process to get it.
E: Correct, yes.
MJ: What everyone wants to know in our community, I think we’ve got thousands and thousands of comments now, is can KB be back in business by Christmas time this year. Do you think that’s a reachable target?
E: Look, the nice thing is we’ve got the support of the toy industry. You know, when I talked to the leaders of some of the biggest toy manufactures and they probably believed we could save the industry. And we need the support of everybody to make this happen. It takes a village, you know. I said, look I don’t want to sound coy here, but I hope and I think we can save the toy industry and this executive said, we know you can and we’re expecting you to. (laughs) The only thing I can think of is that we’re doing our best. Whoever we pick, and it could be a couple of these pop-up companies, we’re using them because they have a methodology that’s worked for years and years. Whether it’s the Halloween stores or the holiday pop-up stores like Calendar Club. They have the model down, they have the real estate, so the only way this is going to work is we have a partner, or two, of one of these big pop-up guys. The key part for us is making sure that we can do this properly and quickly. We will definitely have that support down. Once that infrastructure is in place, then it comes down to – we’ve got tons of people that are, whether it be merchandizers or buyers you know, everybody, we’ll have enough people, I think, to make this work and the support of all these people. It’s going to be an interesting ride.
MJ: Do you have a number of how many stores you would want to hit? What do you think the cost is going to be for you to make it to market? 20 million? 50 million? 100 million?
E: I am hoping for 1000 to 1500 stores for pop-ups. I’m sure you know the types of malls, the A mall, the B mall, and the C mall. The A mall is doing really well in high-end communities and always packed. The B malls are in communities and still very good, kind of packed. The C malls or D malls are the ones that are slowing down maybe they're anchored by a Sears or JC Penny. We believe that we’re contrarians, in the fact that we think that malls are not going away. It’s the experiences that went away. There’s no reason for people to go to a mall anymore because they're boring.
MJ: Is your idea to just focus on the large companies, Mattel, Hasbro, the L.O.L. Toys, or since you're going to have some smaller format have you thought of working with some of the smaller, collectors focused market? Toys like Mezco Toyz, or NECA? The companies that are making toys that are for the collectors, not so much for 8-year-old, more for the father buys it while they’re there buying the toy for their son or daughter?
E: That’s a critical thing. We have to have the right mix. Just remember that KB was a mall store. The format was a small store, so the secret obviously is to curate these stores and make sure we have something for everyone. Part of the success is making sure people come back, right?
E: We are definitely looking to work with the collector groups. You know you mentioned a lot of names, to be honest with you, the toy industry is not something we’re big in. I’ve got a buddy of mine who runs Wicked Cool Toys, and he’s kinda helping us to rebuild this thing, so he’s kind of telling us a lot of the brands to go with that are hot. In the collector's community, we need input from the consumers of what they like to see in these stores too. I don’t want to be just stacking it with the product we think people want, cause that would be kind of stupid. We’ve gotta know, from the collector, what stuff they want to see. If we can do special exclusives, once again, these are the collectors that don’t buy off of Amazon because they're worried about damage or that Amazon is not going to get the exclusive product. For the short run, the custom collectible, the small guys, we’re looking to be that outlet them. We have to be the outlet for both.
MJ: With the secondary toy market, augmenting prices, would you keep all the prices of well sought after toys the original MSRP [manufacturer's suggested retail price]?
E: I can speak for myself that I don’t like taking advantage of customers. I think that, personally, I don’t want to start raising prices because a product is popular. I’d rather stay with the suggested retail, if it’s a hot product, it’s gonna sell out. If it sells out, hopefully, we’ll be in a situation where we get more because we’ll be the largest purchaser of that product for that vendor. So, I don’t think we want to take advantage of our customers and raise prices based on the secondary market.
MJ: That’s what we would love to hear. Do you have a strategy for the hot products like the Marvel Legends or the Star Wars Black Series figures? One of the biggest complaints we heard about TRU is that they kept the same products on the shelves because they didn’t sell. Thus they wouldn’t put new waves of figures out. TRU also didn’t do a lot of liquidating out to Big Lots or Ross. What do you think of moving off the products that people aren’t buying so that you can get the items they do want on the shelves?
E: It really comes down to the supply chain and the purchasing and what’s coming up. In retail, you’ve gotta have a turnover. So if the product is not selling, at some point you gotta get it off the shelves and put new stuff on there. KB did have some outlet stores and that’s always something we’re looking at too. You’ve gotta keep the product fresh. I think TRU because they were so massive, they had a lot of things. Look, I’m sure there was a lot of thought that went into the way they merchandised and turned their product and I can’t answer for them, but I'm sure there must have been a reason, we don’t know. Maybe there was some minimum they had to hit. Maybe they looked at their numbers, said ‘look we gotta wait – we paid too much for these items, for some reason, so we gotta sell them at retail and continue to sell them, we cant just liquidate. I can’t answer for them, but I think we’ll do our best to make sure the items are turned over. We need to keep it fresh because we want people coming into the store every week, every couple weeks, to see whats new. If the cycle slows down and there's nothing new in the store for a month, then people are not going to bother coming back for another month. So you want to get the shopper cycle, you like to see them back in the store, at least twice a month to see what's new. And if they know, that every week, there's always going to be a new inventory, there's a reason for them to come in. That’s positive. Then we’re going to see more turnover because the consumers are going to shop there more often.
MJ: Is your plan to tie the online shopping with the retail store so people can find out, that new items are hitting X, Y, and Z at your pop-ups?
E: That comes down to a website issue and the inventory issue. I think every company would love to have everything match online that’s in the store, but that’s a perfect world. Once again, if you go back to my original discussion about the fact that KB definitely has a smaller footprint, even with our showcase stores, we probably couldn’t fit as many toys there, but online we can have 30 – 40% more toys available online that might not have room in the store. If they're popular enough online, then we can bring all of those products into the stores. It is still a work in process. It would be stupid for me to sit here and answer that because we’re still in the infancy here.
MJ: One of the other big things we are hearing is the TRUs, the Walmarts, the Targets, they don’t do much to staff accordingly. Now, not every person that you would hire would be expert on the toy industry, but knowing that, what is your strategy to make sure each one of your locations has one or two knowledgeable staff members to help out?
E: The sales specialist has gone away. When you’ve got a guy at Target ‘Hey can you tell me when the new figures are coming out?’ He replies, ‘I don’t know, I just stock the shelves.’ That's the problem with retail today is the experience is gone. If there is no value at the retail level, from the sales people, then the consumer’s going to go, ‘What the hell! Forget it. I’ll just buy the damn thing online. If I'm not going to get the answers here, I might as well do some research and figure it out online.’
Once again, I am in a unique situation because I’m getting calls and email from very passionate toy industry people. ‘I've been in the toy industry for 20 years, I’ve been with KB, I've been with TRU. I love my job, I love toys, I love curating.’ Those are the people we’re going to be hiring to man these stores. We want to make sure that there are passionate people in the toy industry there. We’re not just hiring a guy that works at Target that is restocking the shoes one day and then the next day he’s working electronics, and the next he's working in the toys. The fact is that Walmarts, Targets, all the big box stores, and to an extent Amazon, can only provide a homogenized shopping experience because they're only set up to sell to the masses. That’s why they don’t want to take chances on short-run products. Because those have to be sold by someone who knows what he’s talking about. It’s too much trouble.
We need to have at least one toy specialist in each store. If the cashier doesn’t know, they go, ‘Oh talk to Tony, he’s the guy.’ and Tony is 100 feet away and he’s got two other people asking about when the new Star Wars action figures are going to come out. These are things that bring people back to the store. To have that experience because KB did really well with the pricing, and that brought people in, but they also did a great job, and they had a lot of really good toy people in those stores. You don’t have to know everything. You just have to know what’s in the store.
MJ: You had mentioned flagship stores and then some smaller pop-up stores. Do you have a number in mind for square-footage for the smaller stores? Like, I think there was an article that said maybe you’d be looking for kiosks, is that the strategy?
E: No, no, no, no, no. I never said kiosk, I don’t know who said that. I think it's going to be an 80-20 percentage. 80% of the stores will be your standard KB in a mall, setup. That’s the bread and butter of the KB model. 20% of KB stores will be the larger showroom, maybe the size of a TRU, and one per region. Let’s just say, you’ve got 30-40 of those scattered around the country, that’s where you can have the road shows from the toy vendors. That’s where you're going to have your focus groups for the big guys. That’s where you're going to have that different experience and have a larger selection. It is kind of like with TRU and the big anchor store in Times Square. We’re not going to deviate from the standard KB mall model because the mall is where people still go to shop. The mall is where kids are going to be dropped off by their parents, while their mom goes to Macy’s. They know that Susie and Joe are going to go off to play in KB and they know where they are. And people are going to be shopping heavily in malls. It's BS when people say, ‘Oh that’s not true and Amazon and online commerce killed these stores’ No! No. People are social animals, we want to touch and feel and play. I'm sure you know the toy industry is freaking out because of TRU. Because they were also able to showcase a lot of product for kids to play with the stuff. They were able to figure out what was popular and what wasn’t. You cant do that on Amazon. You can't! You can't reach out and touch something. Plus, toys are impulse items. Kids want to walk up to a store. You walk into any toy store and the first thing a kid does is run away for about 10 seconds and then walks up to mom and dad and says, 'Can I have this, please! I want it! Can I have it?’ You're not going to have a mom go, ‘well, let me scan it. Oh, it's $5 cheaper on Amazon. Um, tell you what, we’ll probably get it on Tuesday.’ A kid’s not going to go, ‘are you kidding? You want me to wait till Tuesday? We’re here, can't you spend that $5?’ (laughs).
We have such an amazing model that we can build on this. Whether it’s the impulse, it’s the experience, I think our biggest issue is going to be how do we deal with the crowds at the stores when we open up because we want to make sure people don’t get turned away. Because we know people are going to be jumping and running to the stores to capture their childhood and bring their kids. We’re worried there's going to be long lines and low product. I told Party City the same thing, and I’m telling them all, ‘you guys should be worried about one single thing, and that is making sure you have enough inventory, making sure people don’t get frustrated because the lines are so long to get in the store and we don’t lose sales. To me, that’s going to be the biggest problem.
I need the consumers to understand how big this is. I need the malls to understand how big this is. Seeing how you're representing a really large group, you'd be surprised how many people reporting on business still believe that e-commerce is killing these retailers. They're not. I need someone like I said, that can speak for a certain community to come out and say ‘No! are you kidding me? Do you know how many of our consumers in our community buy toys? We have to buy our product in stores. Because we don’t want the product to be damaged. We want to be able to look at it and maybe open a box up and see what it looks like. We’re collectors. We represent 300 million dollars worth toy business or whatever, you may have to quantify that and I'm hoping you can figure that out. How much does the collecting side spend on toys every year? Because the pop-up companies would like to know this stuff too. They're still very hesitant about doing this. They seem to feel they can just expand their toy business with Go Games and whatever. … I'm looking to you to spread the word too.
MJ: Oh Action Figure Junkies will. Rest easy on that.
A special thanks to Ellia for returning our call. An additional thanks to Evan Liss and Robert Trate for working on this interview. #AFJ4LIFE