Toys “R” Us filed liquidation paperwork today, fairly quick since they just started bankruptcy in September of last year.  The toy industry is reeling, based on news reports.

This got me to thinking about my previous blog post about B&N.   Toys “R” Us is currently operating 735 stores in the US with an average size between 20,000 and 50,000 SF.  We’re talking about somewhere in the neighborhood of 25 million SF of toy retail space that is going to evaporate in fairly short order.  Barnes and Noble has about 16 million SF of retail; and even if 50% of both stores is surplus based on shifts to online shopping that math just might work out.

B&N caters to children specifically in a chunk of their stores already.  If you presume that the long term trend is still smaller retail and more online shopping, but B&N has leases to run out, then they may have a unique opportunity on their hands to buy them enough time to bootstrap their transformation to a different physical and virtual store setting.

B&N needs to strike some favorable deals with toy manufacturers (who now are extremely concerned about distribution channels and discoverability).  Given they can work that out, my strategy would be to expand the children’s sections of existing stores to include more toys.  So long as we’re really just talking about moving shelves around this should not be a large capital investment.

The challenge for B&N will be to carefully execute their branding during this period.  Most children’s toys have associated books.  My suggestion would be an expansion on some of what they do now, not a toy section per se, but a Harry Potter section with books interwoven with toys, colorful displays, and perhaps even store events themed around the books.  You could expand that to a magic section with related toys and books nearby.  The goal overall still needs to be moving toward analog things in the stores and a healthier online presence, and making sure they don’t get branded as a toy store will be important for their long term health.

Executed well, this could be a win-win.  B&N gets additional cash flow and foot traffic to wind up their big store leases, and the toy companies get foot traffic to boost sales. Given that B&N stock edged up 6.25% today, it looks like I’m not the only one thinking this way.

The toy companies should be using this time to sort out their branding strategy and shift to their own online sites but that’s another blog post…