Consumer Products

FAO reopens to bring toy-tainment to the masses

One of the most beloved and famous names in the toy world is back in business this year, betting on a new strategy of retail-tainment to lure new customers and keep cash registers ringing. Following two consecutive Chapter 11 filings, FAO Schwarz went up on the block in December 2003 and was purchased by New York investment firm D.E. Shaw Group at auction last January for a reported US$41 million.
January 1, 2005

One of the most beloved and famous names in the toy world is back in business this year, betting on a new strategy of retail-tainment to lure new customers and keep cash registers ringing. Following two consecutive Chapter 11 filings, FAO Schwarz went up on the block in December 2003 and was purchased by New York investment firm D.E. Shaw Group at auction last January for a reported US$41 million.

On the heels of launching catalogue and on-line divisions last fall, the company has transformed FAO’s two biggest stores – the Manhattan flagship site and the Las Vegas store in Caesar’s Palace – into extravagant playgrounds that reopened in November. And that’s as far as the expansion will go, says FAO executive VP Kim Richmond. ‘For us, experience shopping is a really important part of our strategy. To have the exclusivity, a spectacular environment, and to do it how no one else does it – that’s really our cornerstone.’

The New York store’s new floorplan is more open than before, she says, making its 5,000-plus SKUs more accessible to consumers. And a disctinct amusement park look and feel is played up with attractions like an old-fashioned ice cream parlor, an aviation-quality 3-D motion simulator, and of course, a 22-foot-long floor piano upon which staff reenact the famous scene from the movie Big every half hour. There is also a floor called the rec room that features a DJ, big-screen TVs, sofas, arcade games and even a karaoke nook.

FAO has also been working with its suppliers to create unique sections that highlight their products. ‘We wanted to make sure that the product we sell is not available just anywhere,’ says Richmond. ‘We’ve worked very closely with our vendor partners to be sure that the product assortment and the experience on offer is completely unique to FAO Schwarz. Everything we do has a twist to it.’

So while Hot Wheels is hardly an unknown toy brand, to generate exclusivity, FAO and Mattel teamed up on the Hot Wheels Factory. For US$20, kids buy a key chain with an access code they can use to custom-design their own car. An on-site manufacturing kiosk takes the specs and spits out the personalized model in a collector’s case with an authenticity certificate.

Putting kids in the driver’s seat when it comes to toy shopping is a fundamental point of appeal at the New York store, which features a doll adoption area that’s set up like an actual nursery, with staff dressed as nurses. (In fact, all the staff at FAO had to audition in character for their jobs.) In the American Kennel Club corner, kids choose one of nine purebred stuffed dog toys, which come complete with papers and an AKC carrier, and they can even breed their pooches to get puppies. But one of the most popular store fixtures so far is the Madame Alexander doll factory, where dolls are designed by customers and constructed right in the store for US$40 and up.

While FAO’s image as a high-end, luxury toy store is still upheld (there’s always the US$50,000 Ferrari or the US$300,000 motion simulator if your tastes run at a posher pace), Richmond insists that there is much more for the masses, and that the store was purposely merchandised to have an average price point of US$20. ‘We’re not just price-driven, it’s about value for the money,’ she says. ‘If someone has a wonderful experience choosing the elements of a doll at the doll factory, they’ve created a memory and a very special doll. Are there cheaper dolls out there? Probably. Will this one be special to that child? Probably. We’ve added extra value to the toy by the experience and the uniqueness.’

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