Child World / Children’s Palace

In a market dominated by Toys R Us, one company stood out as the second-largest toy retailer in the United States. Today, we’re talking about Child World.

Shneider & Arnesano and the 1960s

It begins in Massachusetts in 1962. When Sidney Shneider, a Boston-native, would team up with his former coworker Joseph Arnesano to found Child World, Inc in Quincy, with the company headquartered in Avon.

Learning from Competition

Child World was well-known for its warehouse-style layout and, much like their competitor, employed a “big-box” model: with long aisles and over-stock stored in plain view. The stores used the “Grid” layout, used everywhere from Walgreens to Walmart. This layout maximizes product exposure but makes quicker shopping difficult. However, it loses traffic-flow for a forced customer path. The end-caps of the aisles gives great opportunities for product exposure and impulse buying. Chains like Target use this layout but usually opt for the equally popular “Racetrack” layout.

The 70s and Children’s Palace or The Rise to Second-Best

Children’s Palace, yet another toy chain to cash in on the relatively new “superstore craze,” would be founded in 1968. The Lionel Corporation also had a bid in the toy business, with their Kiddie City chain, founded the next year. In 1975, Child World would acquire Children’s Palace from Kobacker Stores for $3.5 million. [1]

Cole National and the Slump of the Late 80s

By 1981, Child World was ranked as the second-largest toy seller in the United States, right behind Toys R Us. As well as toys, the chains also sold pets. The Cole National Corporation, founded by Joseph Cole, operated Things Remembered as well as several optical centers like Cole Vision, as well as Sears Optical and Montgomery Ward Vision. Cole would acquire Child World, Inc. that same year, in what would be called “its highest-profile deal” and would oversee the latter of the company’s most dominant era. Peter Hayes would step up as President and, in 1985, they would sell off 18 percent of Child World to the public, by which point the company operated over 100 stores in 21 states under the Child World and Children’s Palace banners. [5]

Throughout the 1980s, Child World’s main focus remained on growing its brand power, and their stores were beginning to get run down. The “must-have” toy lines of the ’80s, like Teddy Ruxpin and Cabbage Patch Kids, would see the chains get unprecedented traffic as parents scrambled to secure one for their kids. Peter Panda, the chain’s mascot, was beginning to be a challenger to Geoffrey. The stores had an iconic, castle-inspired design and an even more playful atmosphere than Toys R Us. But the latter would become the ultimate winner when it came to recognition.

At a time when Toys R Us was focused on expansion and innovation, the antiquated design of Child World would end up seeing their clients go to their competitor. They didn’t miss a chance to turn it around, though, and would announce a new in-store format, which would prioritize swapping out their warehouse-design for a more hands-on atmosphere – this would be very well received and saw good results in the Christmas season, leading the company to announce the implementation of this design into 11 other stores. However, the chain wouldn’t get to see the company-wide remodel they were planning. By this time, the company operated around 182 units nationwide. [6]

Welcome to The 90s

Entering the 1990s, Hayes would resign from the company and many of his fellow executives would follow suit, beginning a trend of frequent management changes, with each executive taking the company in a different direction. That year would also mark the beginning of the 1990 Recession (which would continue through to the following March.) With less money to spend on luxuries, Americans would turn to anyone who could offer a price-cut – Child World simply couldn’t. Geoffrey was just a bit more appealing than Peter Panda when it came to shoppers, and branding aside money talks. And there weren’t any coveted toy lines that would pull traffic back to the stores like before. Cole would restrict the amount of money going into the company and would result in them missing payment deadlines and racking up debt. This led to companies like LEGO ignoring any requests for shipments and would see their overstock become under-stocked as they struggled to fill shelves. But Cole wouldn’t let go until it was too late.

The chains would hold massive sales and started closing under-performing locations. That year, the Consumer Product Safety Commission would name the company in a lawsuit, but Cole was able to sell off Child World to a limited partnership in Avon, in agreement that Cole would take the grunt of the debt. The partnership would give control of the company to a group of former Toys R Us executives, but it wouldn’t see any change and they would end up closing around 26 locations and would lose their line of credit amid heavy quarterly losses.

Bankruptcy and Sabotage

The company would enter 1991 with debt in the neighborhood of $300 million, and it would prove to be their cause of death. With rising buy-ups and industry consolidation, along with intense pressures from Toys R Us and no help coming from newly impoverished Americans, they would be crushed under their debt. But this was a trend across the board as Kiddie City would enter Chapter 11 bankruptcy protection that year. As many American companies would slim down their operations, it would seem that the toy market would as well, and simply wasn’t big enough for three dominant chains to survive. The industry would see several others hit the dust; from Circus World to K&K, both acquired by Kay-Bee.

Child World would end up closing over half their fleet, bringing the count to 71, mostly focused in the Northeast. However, this was like using a band-aid to stop a sinking ship, and Child World would also file for Chapter 11. The presiding judge would find viable evidence that the Avon partnership had intentionally sabotaged the company, with the plan of liquidating it to avoid paying the debt they owed.

Kiddie City, still in bankruptcy at this time, had announced work on plans of a merger with Child World, but it wouldn’t come to fruition as the company couldn’t secure the capital necessary and would announce the closure of the entirety of their stores the following June. Child World’s massive markdowns would ultimately become liquidation sales – and the process would take about six weeks to complete before the company was no more. [6]

Their late decision to adopt a new in-store format was coupled with the debt due to Cole, and the recession’s effect on the market – making a pretty deep hole that they simply weren’t equipped to get out of. If anything, the chain was too similar to Toys R Us, even though that was one of their only options. Even if they somehow managed to merge with Kiddie City, or survive in some other way, Walmart would’ve destroyed them. If we look at another industry, like with video-rental – Hollywood Video was second behind Blockbuster for decades but saw a similar fate for all the same reasons. Consolidation has become a bigger trend in modern business, whether big-box chains or department stores and even websites, there’s always someone who can do it better and, more importantly, at a cheaper price. Even Toys R Us, a category killer when it came to the toy industry, was overtaken by Walmart and Amazon. The world is slowly realizing that we don’t need multiple stores that essentially do the same thing, online or physical, and Child World is a prime example of what happens when you become second best.

Citations

[1] “Child World Buys Toy Division”. Wall Street Journal. April 14, 1975. p. 3.

[2] (n.d.) Retrieved from Child World ROCKS: https://childworld.rocks/

[3] (n.d.) Child World. Retrieved from Retailer Graveyard: http://www.retailergraveyard.com/categories/entertainment/child-world

[4] (n.d.) Cole National Corp. Retrieved from Case Western Reserve University: https://case.edu/ech/articles/c/cole-national-corp

[5] (n.d.) Cole National Corporation. Retrieved from Funding Universe: http://www.fundinguniverse.com/company-histories/cole-national-corporation-history/

[6] (n.d.) Retrieved from Find Articles: http://findarticles.com/p/articles/mi_m3092/is_/ai_12540143

[7] (n.d.) Retrieved from William Francis Galvin, Secretary of the Commonwealth of Massachusetts: https://www.sec.state.ma.us/

Alex Nuelle, 2020


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APA: Nuelle, A. (2020, July 28). Child World / Children’s Palace. Post-Mortar. https://postmortar.org/2020/07/28/child-world-palace/

MLA: Nuelle, Alex. “Child World / Children’s Palace.” Post-Mortar, 28 July 2020, postmortar.org/2020/07/28/child-world-palace/

Chicago: Alex Nuelle, “Child World / Children’s Palace,” Post-Mortar, July 28, 2020, https://postmortar.org/2020/07/28/child-world-palace/

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