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Toys 'R' Us Is Back. Meet The $40 Million-Backed Startup That Made It Possible

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In September 2017 Toys ‘R’ Us filed for bankruptcy, seeking relief from over $5 billion in debt. Within a year, the 70-year-old brand had closed the doors of over 800 stores. But today the storied company announced that it will return to the US market in time for the holidays, with retail locations in Houston and Paramus, New Jersey.

When its doors reopen this November, Geoffrey the Giraffe will still be there to greet customers but not much else will be the same. That’s because Tru Kids, the parent company that owns the Toys ‘R’ Us brand, has entered into a joint venture with B8ta, a San Francisco-based experiential retailer that has already helped reinvigorate the in-store experience for traditional behemoths like Macy’s and Lowe’s.

The company’s 31-year-old CEO Vibhu Norby - a philosophy major who was fired from his first Silicon Valley engineering job - envisions the future of retail looking a lot like an Apple Store. Gone are the 40,000-square-foot emporiums lined with shelves stacked high with toys. In their place will be 5,000-square-foot toyshops with simple stations where kids (and their parents) can interact with the latest crazes, under the watchful eye of sensors and trained product specialists analyzing customer interactions.

“We're based in San Francisco and when we went out to raise money for the first time we were talking to a bunch of technology VCs who had already written off physical retail a long time ago,” says Norby, who went on to raise $40 million from investors like Khosla and Sound Ventures. “But now a lot of big retailers are also adopting this model.”

Norby first cut his teeth in business founding Y Combinator-backed social media platform Origami Labs, which was quickly acquired by Nest. When Google acquired that company a few months later, he started turning his attention to retail. Putting his philosophy training to use, he studied why people were no longer buying hardware at places like BestBuy. 

In 2015, alongside Phillip Raub and William Mintun he left to found B8ta, a retail-as-a-service platform that curates in-store experiences where customers can interact with the latest products from Google and Dolby, as well as from niche brands like Onewheel and Ekster. 

The result is a meticulously studied retailer completely decluttered except for simple tables with devices to test out and employees specializing in those products. There’s no commission or wholesale deals between B8ta and brands. Instead, they pay a subscription for real estate in the store and directly train the employees that oversee their products. Companies receive the revenue from all sales and analytics on customer interactions informed by both sensors and the humans monitoring them.

“The focus of our company is the offline experience,” says Norby. “Companies have a growing appetite for data to adjust their product, pricing and merchandising.”

This is the model B8ta hopes to use to reinvigorate Toys ‘R’ Us. As with B8ta’s other stores, almost all of the new Toys ‘R’ Us’ company’s revenue will come from selling subscriptions to brands that will pay for in-store and online real estate. Though the company declined to name names as to who is on board, they claim to have “significant commitments at this point.”

To emphasize the importance of this Toys ‘R’ Us ventures, Tru Kids opted to enter into a joint partnership with both companies owning 50 percent. For the current international locations (there are over 700 Toys 'R' Us locations across 25 countries) Tru Kids often acts as a licenser that only directly intervenes to maintain standards. For the US iteration, Tru Kids CEO Richard Barry will be serving as Interim co-CEO alongside B8ta’s Raub.

“This was such an important market for them that they wanted to be involved as a partner,” explained Raub, who also served as Director of Marketing for Nintendo as the Wii grew to prominence. “The US market really sets the tone for the rest of the global business  and they wanted to bring it back in a special, unique way.”

Despite the uphill battle of reviving a company that went through the largest bankruptcy of a US retailer since Kmart in 2004, B8ta views the new venture as validation of their model.

“This is truly a wake up call for the industry that has ignored our model to this point,” says Norby. “They're going to see that our model creates better stores and better experiences that are more resilient.”

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