Letter from America - Rick Derr

Life of an Indie - the ups and downs

After 20 years working at A.C. Nielsen/D&B Research Company, Rick opened the first Learning Express Toys franchise in the Chicago area in 1996, and then became a sub-franchiser, opening 10 more stores. Although leaving the corporate environment behind, he has combined his expertise in data and numbers with a passion for the toy retail space. This month, Rick looks at crazes and how best to cope with them.

Take a good look at this chart. Any guesses? It documents the rise and fall of the Squishmallows trend in most indies. Oh boy, that ride to the top is exhilarating but with every high comes a low, and the decline, depending on how quick, can also be painful. We like to see consistent growth, and when we experience huge swings in comparative numbers it can get you down (my co-workers might even say cranky). That’s a little where I am right now. But I do realize selling over eight hundred thousand dollars’ worth ($822,399) of one line over basically four and a half years is amazing.

We are having a decent year in 2024, but measured against the past three years plus, all you see on charts are negatives. So, what action to take?

We focus on what we have learned over the last 28 years by building business with no hot products or fads in the equation. It’s important to have a strategy that keeps you in business when there are no hot trends. For us this has been building and investing in the team; curating and adopting our product mix to the changing needs of our community and kids and lastly, wrapping this in a magical brick and mortar store where wonderment glows. Simply put, we stick to our formula of T(team), P (product) and W (wow).

We have learned important lessons during hot product periods though, and these include:

• Buy aggressively at the beginning of the fad, stack orders so you can cancel if needs be and diversify by seeking out multiple vendors if you can. In the case of Squishmallows this was not possible, but the popularity of the Squishmallows brand helped to sell more plush overall.

• Blast the fad across the airwaves on social media to pick up new customers; then you’ll see a dramatic increase in sales due to increased traffic rather than hoping the average basket spend will go up. (If you accomplish both, great!)

• Take and save some of the ongoing profits and don’t wait until the end. There is a temptation to keep spending, hoping that the fad will never end, but it will, and you don’t want to be left with excessive stock of little or no value to clear out.

• Don’t take so much out of the business cash-wise that you get tied up in cash flow issues. A death knell sign is when a toy retailer stops bringing in new stock. The toy business is all about being forward looking; when you stop betting smartly on the new, the end is nigh.

• Do not over hire; we have found the current team has immense flexibility to handle upside business – it’s better to stick with a basic team that is trained and knowledgeable.

• Look for early signs of a slowdown in any toy trend by networking with other stores, reading up on the industry and using AI to track trends across the world.

The biggest trends that we have been a part of have been:

• Beanie Babies 1997

• Pokémon 2000

• Webkinz 2008

• Rainbow Loom bracelets 2013

• Shopkins 2015

• Fidget Spinners/Fingerlings 2017

• L.O.L. Surprise! 2018

• Children’s face masks 2020 (pandemic)

• ‘Squidgets’ (Squishmallows and Fidgets) 2021-2023

One of the shortest crazes was Fidget Spinners in early 2017. This came out of nowhere in February 2017, peaked in April and was gone by August. We beat Walmart, Amazon and the other big boxes in this meteoric rise as they never even received spinner stock till that summer. I remember that the audience was distinctly spliteither for spinners or against, as kids took sides - cool versus nerdy. Perhaps that is why it ended quickly but was a foreshadow of what was to come five years later.

As I write this, I have a new appreciation for the Squishmallows trend - to last this long, provide millions of smiles to kids and watch a lifestyle brand bloom is undeniably cool. Sales may be down but, heeding our own advice, we’ll keep doing what indie toy stores must do in this new retail world. I hope you do too, and that we’ll all see the next big hot toy craze sooner than later.