The parent company of Toys R Us is turning to an important rival to start its e-commerce business ahead of the holiday shopping season.
Tru Kids Brands merges with Discount Corp. Releases Toysrus.com, according to a joint release.
The website, launched on Tuesday, contains product reviews and videos and directs browsers to a purchase button on Target.com to complete the purchase.
Both Target and Tru Kids refused to share details of financial terms. But while analysts say the move is a big gain for Target's toy business, they question why Toys R Us's parent company would decide to outsource e-commerce to a third party.
The move comes as the first two new Toys R Us stores – one in Houston, the other in Paramus, New Jersey – open in November as part of a small comeback of the abandoned iconic toy chain in US Target.com will also handle online sales in the two stores.
Retailers including Walmart, Party City and Target have competed for sale again on the table after Toys R Us filed for bankruptcy and wound up in March 2018. But Target has been one of the most aggressive. In October last year, it dedicated extra space in 500 locations near former Toys R Us stores to include a larger selection and larger toys such as playrooms.
Neil Saunders, CEO of GlobalData Retail, says that Tru Kids' deal with Target helps Minneapolis-based discounts strengthen already strong toy sales. But it also helps Toys R Us deliver the complex issues of fulfillment. Still, he says the deal "raises a lot of questions about Toys R Us's future."
"It's a nice solution, but not an ideal solution," Saunders said. "It gives control to another competitor."
Jason Goldberg, Head of Trading Strategy for Publicis Communications, agrees.
"If True Brands were really trying to rebuild a sustainable toy business, they would never want to outsource the deal with a third party and certainly not a rival," he said. "Unfortunately, this is probably a sign that the current Tru Kids "The effort is a shallow effort to make money from a brand they own, rather than an attempt to build a serious toy competitor."
He remembered the huge mistake both Target and Toys R Oss made when outsourcing their online business to Amazon in the early days of e-commerce.
Tru Kids collaborates with other partners to stage the modest return.
During the last summer, Tru Kids struck a deal with a startup called B8ta, an experimental retailer to start interactive stores. Toymakers will pay for space in stores but will get all sales. The tech company will also offer brands access to data that will track traffic patterns and other metrics.
Tru Kids has also signed a deal with Candytopia, a candy-based art show manufacturer, to launch pop-up stores this month in Chicago and Atlanta.
After Toys R Us closed its stores, a group of investors won an auction for Toys R Us assets in October 2018, believing they would do better by potentially reviving the toy chain rather than selling it for parts. Richard Barry, now CEO of Tru Kids and a former Toys R Us boss, along with other former executives, founded Tru Kids earlier this year and now manages the Toys R Us, Babies R Us and Geoffrey brands.