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Retail commerce | Experiential retail

A New New Model for FAO Schwarz

Photo of child playing with a toy
How the venerable toy company can benefit from pay-for-play

Symbiosis in the form of mutualism has kept numerous species alive for millennia. Crocodiles, for instance, allow plovers to feed on bits of meat in their teeth, while the birds provide them with a much-needed dental cleaning. At the same time, the type of symbiosis known as parasitism has harmed many species for millennia—think of mosquitos spreading malaria to humans.


Symbiosis is apparent in the retail world too. For example, U.S. department store JCPenney hosts Sephora stores-within-stores in many of its physical shops. In fact, this partnership with the cosmetics retailer is one of Penney's bright spots. Not to be outdone, Birchbox, known for its cosmetics subscriptions boxes, will soon have mini shops within a number of Walgreens drugstores. Birchbox can establish a physical presence and evolve beyond the subscription model without investing heavily and at a significant risk, and Walgreens can distinguish itself from its drugstore competitors.


Now legendary U.S. toys retailer FAO Schwarz plans to partner with, among others, Canadian department store Hudson’s Bay Co. (HBC).


Last year, HBC called its market "brutal." Traffic is down. It's doing deals to reduce store footprints. And now it has agreed to host FAO.


What does FAO bring to HBC? A name that some nostalgic parents and grandparents might remember fondly, but not much else. Relatively few of its toys are exclusive to the brand, and even those can easily be ordered online. What's more, FAO's business is highly seasonal. In comparison, Sephora and Birchbox sell products that, yes, can be ordered online but that consumers often prefer to buy in person. You don't need to smell a Lego kit the way you do perfume before deciding whether it's the right choice. In addition, Sephora and, to a lesser degree, Birchbox are known for carrying a breadth of brands and products difficult to find elsewhere, and Sephora produces its own successful proprietary range of products.


And what does HBC bring to FAO? Some traffic, but not enough to grow its business appreciably. In short, what was meant to be a mutually beneficial symbiosis could end up benefiting neither party.


So how can FAO—and HBC, by extension—transform a potentially parasitic relationship into one of mutualism? By selling play rather than toys.


Stores are a place to try things. That's what sets them apart from online. But play isn't always free.


Parents pay as much as $20 an hour to let their kids jump on trampolines. They pay even more for laser tag. To those providers of "play," selling toys is gravy.


Ask a nearby parent this: "Would you take your kids to a place where they could play with every toy if it were safe, clean, and well lit?" I bet almost every parent would say, "Yes!" And if a kid falls in love with a toy while playing, chances are also good that the parents will buy it. Sell food and beverages in the store while you're at it, and you have an additional source of revenue.


FAO should be synonymous with play, not toys. People come to play. They pay for play. They subscribe to play. And they can't play at Amazon.


In the current FAO-HBC relationship, it's unclear which is the parasite and which is the host. But one thing is certain: Even parasites won't cling to a dying host. They can teach us something—after all, they've survived for some 250 million years.



author: Charles Benaiah

Charles Benaiah

Charles Benaiah is the founder of watzan, a provider of digital merchandising and content curation solutions.



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