Guest post by Phil Wrzesinski
I know it rocked your world to hear that Toy House is closing. Big, iconic, 67-year old businesses don’t close when the owner is still too young to retire. But sometimes they do, and sometimes it is for reasons so localized that it only makes sense once you see the whole picture. Let’s take a look at some of the factors…
The Big A’s
Yes Amazon and Apple have hurt us over the years. Apple has taken a lot of dollars away from our tweens and teens sales.
Amazon has caused a major shift in the way we run our business. As a large store with over 30,000 skus and 400-500 vendors, we were the go-to source for everything toy-related. We had all the vendors from Hasbro and Mattel to LEGO and Playmobil to Step2 and Little Tikes. If we didn’t have what you wanted, we would take your name and place the item on our next order. It might take us six or eight weeks, but we would get you what you wanted. Amazon Prime took that business away from us completely. If we don’t have it in stock, our customers have ordered it before they get back in their cars.
Neither of those factors was enough to force us out of business. We focused on new and unique offerings for our older kids and spent more time selling what we had rather than worrying about what we didn’t.
It started with bikes. We used to sell bikes big and small until Huffy was selling to us last year’s closeouts at $54 while Walmart sold this year’s models at $59.99. We lost Fisher Price Power Wheels to a similar price issue. Radio Flyer started selling just over cost on their website. Little Tikes went to MGA and got rid of the specialty customers. Step2 also went direct online. The volume I was doing with those companies alone would have been enough to make a comfortable living.
Instead we found other vendors, emphasized other categories. We grew our games and our preschool and our puzzles and our science and our crafts. We lowered our prices on some items only to make it up on others.
This one hit us in multiple ways. First, we lost our line of credit with our bank as they sold themselves to a bigger bank. As you all know, cash flow is more critical than profit (just ask Amazon). Without the line, we couldn’t stock our massive store at the same levels. Second, it hurt our customer base.
Jackson, Michigan has an average household income of only $27,342. It used to be north of $35,000. Over 68% of our downtown folks are below the poverty line. Birth rates plummeted like they did nationally. Our schools have lost 28% of their enrollment since 2007. In short, we lost kids, we lost families, we lost money. My market for toys was a shell of its former self and our sales reflected that.
Still we were able to survive this. In 2009 we had the largest profit the store had ever had. In 2014 we had the second largest profit ever.
The Beginning of the End
Even with the huge profits in 2014, we had our concerns. For reasons we still don’t understand, December 2014 was a huge dud. The three months prior, we had seen double-digit increases in toy sales. We bought a little heavier for December, expecting a 5-7% increase. Instead, our December sales were down 13% that year. Although we finished with profit, we didn’t finish with cashflow and we didn’t have a line of credit to bail us out.
In 2015 we started digging ourselves out. Unfortunately we weren’t the only ones digging. In March of 2015 the city started Dig Jackson – a nine month street construction project that tore up the entire main downtown street to replace sewers and utilities. This effectively cut off our store from the southern parts of the city/county where our customer base lived. On top of that road, the city decided to do other construction projects on over 75% of the blocks downtown. The more holes they dug, the deeper ours got.
This year, with the east/west roads completed, the city decided to tackle the north/south roads – in spite of a petition signed by every single downtown business owner asking for a one-year delay to help us recover from 2015. For us, that was the final nail. The cashflow hole was so deep, nothing we did would get us out. Finally we realized we are too deep to dig anymore. That is why we will be closing our doors.
You can overcome a lot of adversity. You can overcome losing major lines and major vendors. You can work around Apple and Amazon and the vendors selling direct. You can work around localized income problems and even declining populations. You can even work around construction and other disruptions – as long as you have cash. I can blame dozens of factors for why we closed, but the bottom line is that I didn’t manage my cash well enough to stay open.
Retailing has never been for the faint of heart. It is a hard life, but it is a rewarding life. Don’t believe me? Go to our Facebook page and see the comments people have been leaving. Yeah, they break my heart many times over. The response we are getting from the community has been amazing and heartfelt and uplifting. We know we made a difference. You are making a difference in your communities, too.
You all are facing the challenges of the Big A’s, our own vendors, and an uncertain future economy. Some of you are even thriving in these times. Manage your cash flow. Manage your inventory. You’ll make it through. We caught a perfect storm and weren’t able to ride it out. I know ASTRA has some ways to help you weather your own storms.
Phil Wrzesinski is a lifelong toy retailer. He got his start at age 7 putting price tags on boxes for 10 cents an hour at his grandpa’s store. For the last 23 years he has been working full time at Toy House including the last 12 years at the helm. He has shared the lessons he has learned with ASTRA and other retailers all across America. Now, with the closing of his iconic store, Phil shares one more lesson that we all can take to heart.