THE WALT DISNEY Co. and Warner Bros. announced plans last week to begin the first cutbacks of their once-thriving retail stores. Warner's parent company, Time Warner Inc., said it was considering decreasing the sizes and closing some of its 140 Studio Store locations in the United States. Disney, whose consumer products division's operating profit fell 38 percent to $102 million in fiscal 1999, said it might close underperforming stores and ease up in opening new locations. In mid-January, the entertainment giant will close its first retail location in Atlanta.
Has the time passed for these retail ventures? Have consumers turned their attention to other merchandise or moved on to new fads? Are major closings or downsizings expected?
Partner, Marx Layne & Co., Farmington Hills, Mich.
The easy money has been made. Both of these companies have very classic properties but the world has changed in that arena. It's not that Minnie, Mickey, Goofy aren't still popular. But some of the product and merchandise has to change. They need to recognize that their audience is into everything from Pokemon to South Park to interactive things, which is not where they are.
Their value is in collectibility. Classic can work very well if they are willing to accept the niche they are in and recognize that they may have to take a step back. There is always going to be something new. But we come back to the classics.
Also, It's not like there was a lot of growth left for them. Not every shopping center is right for them. You can't ride something until it goes lame and expect it to be powerful. When they opened it was great, but at some point it's like "what else do you got? I've seen it." I think you'll see some of the merchandise changing. They're not struggling, they've just lost a little momentum.
Director of institutional research, Pittsburg Institutional, Great Neck, N.Y.
I think some of the stores are a little outdated. They haven't updated the merchandise or changed the themes in a while. You walk into the stores and you see the same things you saw a couple of years ago, unless they have a new movie out and you see some products related to that. In general, I think they need to update the merchandise to go along with whatever the trend is. Maybe in terms of more video games -- that's what kids want now, computer games and interactive stuff. These are traditional characters though, so you are not going to see Mickey Mouse suddenly change his look.
Disney has also said they plan to decrease the number of licensees of their characters. If Mickey is not easy to find, maybe that will draw people into the stores where they know they can find him. It really hasn't been releasing a lot of movies in the past year on video, which has been hurting them on the retail level. If kids aren't watching the videos, they don't want all the toys that go along with them.
Telecommunications analyst, Olde Discount Corp., Detroit
Disney has fairly well saturated many of the prime retail locations. The question for them is whether they want to go downstream to the B-rated focus, which it doesn't seem they want to do. They have a ton of these stores out there.
Pricing is an issue, too. Disney is a premier brand, and as a result they are out there charging prime rates. Also, their merchandise is not really new. There are a lot of people visiting the stores right now, but they are not really buying the merchandise.
Disney was really riding the wave of the excesses of the '90s. They were terribly successful with their movies. There were 4,200 licensees of their consumer products. The only outlet for their merchandise was not the Disney store, so it has lost its novelty. There is competition at a lot of different levels, in clothing, toys and other movie-related items.
Entertainment analyst, the Seidler Companies, Los Angeles
It's not over for them. You constantly have a renewal of children and young adults who are going to be interested in this stuff. There is always a cycle of new customers; maybe we are just in the middle of one of these cycles. There is such a push in retail to catch the youth audience right now. In Disney's heyday, there certainly wasn't that much competition out there.
I don't know how many entertainment stores one mall can handle. You just reach a saturation point where there is only so much themed merchandise that customers want to buy. For a long time, Disney was the only player in that market.
They are going to cut down on overhead and be smarter about the products they make and market. I don't expect mass closings, especially with Disney. But it is certainly not going to grow as fast as it has.