FAO Schwarz: Back from the Dead

January 31, 2019 | By: Michael Stone, Chairman and Co-founder of Beanstalk

FAO Schwarz, the iconic toy retailer, closed its last store, the New York City Fifth Avenue flagship, in 2015. Dead and gone? Not quite. The buyer of the FAO intellectual property (purchased in 2016), ThreeSixtyGroup, opened a new flagship in New York’s Rockefeller Plaza on Nov. 16, 2018 to much fanfare. Will this brand revival succeed?

We can all remember brands we loved that melted away, brands we trusted, to which we were loyal and emotionally attached: Oldsmobile, Woolworth’s, Brim coffee, Amoco, Blockbuster, among many others. Sometimes, however, when the conditions are right and it’s done correctly, brand revival can succeed. Consider Polaroid, White Cloud, The Sharper Image, each brought back after going out of business and disappearing for years. Brands can easily fade from the marketplace, but not so easily from our memories. Often, strong brand equity is left behind.

Let’s examine what it takes to successfully bring a dormant brand back and how FAO Schwarz satisfies the criteria.

First, there must be a significant amount of awareness that still exists, including emotional attachment and authenticity. FAO certainly fulfills this requirement. It disappeared a short time ago and is still fresh in our memories. Many consumers, across generations, grew up with FAO and have fond recollections of the experience and wonder of the store.

Second, there must be a market gap to fill. The recent liquidation of retail giant Toys“R”Us (TRU) left billions of dollars of toy sales looking for a home. And while Walmart, Target and Amazon.com are eating up big pieces of the pie, there’s still plenty to go around. That’s a lot of white space to fill, and FAO has a unique selling proposition.

Third, a resurrected brand must have a good story to tell. FAO clearly has “story.” The brand was all about the experiences that it delivered to its customers (long before experiential retail became de rigeur). Its new 20,000-square-foot store will be even more experiential than before. The life-size piano, made famous by Tom Hanks in the move "Big," will be there, along with magic shows, a play grocery store and a station to construct a remote-controlled car.

Fourth, strong brand management and marketing support must be provided. It’s too early to tell if ThreeSixtyGroup will provide the resources that are necessary, but it's off to a good start with the marketing surrounding the opening of the Rockefeller Plaza flagship. After all, FAO has to lure customers who are solely interested in buying toys, since there's no food or televisions or apparel for sale, as at retailers like Walmart and Target.

Fifth, the competition has to be considered. This will be the biggest challenge for FAO. Walmart, Target and Amazon are all ramping up their toy offerings with more floor space, more online support and, in the case of Amazon, a printed toy catalog for the holiday season. Other retailers are also jumping in, including Party City, Ace Hardware, Costco, Kohl’s, Michaels, and Kroger, which will feature Geoffrey’s Toy Box in 600 stores, resurrecting the TRU brand for a short time. Competition will be stiff, but FAO distinguishes itself with the unique experiences that it offers.

Sixth, the mistakes that caused the demise of a brand cannot be repeated by the new owner. In the case of FAO, it met its end due to difficulties sustaining a large group of stores, too much inventory and an inability to keep up with e-commerce. For better or worse, ThreeSixtyGroup will be minimizing inventory by sourcing much of its product assortment itself (branded “FAO”) and by limiting its real estate by focusing on “stores within a store” and franchising.

Finally, for a brand to succeed at revival, consumers need to “feel the power” of the brand. Each case is different. Yes, the six requirements noted above are important, but sometimes a brand just has a lot of power with consumers, and they feel it. My instinct tells me that FAO Schwarz is just that kind of powerful brand.

The stars seem to be aligned for FAO Schwarz if it plays its cards right. Brand memory is a powerful thing. As for me, I’m rooting for this brand to make a comeback.

Michael Stone is the chairman and co-founder of global brand extension licensing agency Beanstalk, and the author of "The Power of Licensing: Harnessing Brand Equity" (Ankerwycke, 2018).