Building a name at retail, one brick at a time

To a toy manufacturer, there's nothing quite as satisfying as one of its brands becoming a success at retail. But when a company decides to extend that name by crossing over into retail with a branded storefront operation, it requires more than just a deft hand and a strong reputation.

After owning and operating retail stores for more than a decade, Enfield, Conn.-based Lego recently developed a store concept on which to base a retail chain bearing its name. The intention was to replicate an already-established store format on a much broader level, while still maintaining a manufacturing stronghold in the construction toy category. As the saying goes, Rome wasn't built in a day—and neither was Lego's retail operation. But as with any great work, the philosophy of these builders was a brick-by-brick approach, one layer at a time.

It was more than 10 years ago that Lego opened the doors to its first store at the Mall of America in Minneapolis. Dubbed Lego Imagination Station, this locale featured its own store design—as did the other original Lego stores that soon followed—and generated a strong following.

“Historically, the Lego Group has opened stores as part of key tourist destinations,” Matt Harker, vice president, Lego Brand Retail, tells Playthings. “Although these stores perform well, they required significant upfront investments and could not provide the consistent platform necessary to effectively operate more than a handful of locations.” Therefore, if Lego wanted to expand its reach, company executives inevitably realized they would need to streamline their resources and refocus their vision.

Lego re-thought where best to position itself retail-wise. “We wanted to expand the Lego brand presence to better reach consumers where they live and shop every day,” says Harker. The most optimal location was, incidentally, right where it had begun: in the mall. “Results thus far confirm these stores deliver incremental sales and create value for the Lego Group,” he adds.

Inside one of Lego's newer stores—in the Smithhaven Mall, Lake Grove, N.Y., a shopping mecca for Long Island suburbanites—two children sit at a Lego table, busily constructing one-of-a-kind creations. At the back wall, another young boy helps himself to one of the more than 100 bins teeming with rainbow-hued Lego pieces before sitting down to build his own plaything.

The fact that kids can play with the very items they are buying is a tremendous selling point for Lego Stores. Harker says the hands-on component, along with a design heralded by a bold color palette and numerous model displays, allows the venue to “exude a character all its own that conveys the creativity and active fun of the Lego brand.”

And tableside play isn't the only way for kids to engage themselves while shopping. According to Christine Caramante, marketing manager, Lego Brand Retail, little customers can get their hands on new products during a variety of in-store activities. Some of the more recent ones include Bionicle building contests, Clikits make-and-take events, Harry Potter raffles and the building of a giant Lego Spider-Man mural. Caramante says that Lego Stores also plans to test a birthday party program later this year.

Product exclusives enable Lego Stores to compete with retailers carrying other building toys. Namely, these include select role-play items and lines like Belville and Scala that are only otherwise available in European markets.

With space in both the manufacturing and retail worlds, Lego continues to play a dual role in the toy industry. While maintaining a separate presence in two distinct markets requires a bit of juggling, Harker points out that it suits the company's business practices well. “Our retail division works as an integrated part of the Lego Americas operation, not a renegade, stand-alone business,” he explains. “Therefore, we are able to make decisions that benefit Lego as a whole in the marketplace.”

As to whether or not the retail operation has hurt other Lego sales, company research indicates that operating a brand store actually helps bolster the Lego brand. Harker points out the stores' trickle-down effect, boosting strong incremental sales for the Lego Group and its trade retail partners.

In fact, Lego's turn as a retailer has impacted its relationships with other retailers that carry Lego products and the consumers who purchase them—for the better. “We test product offerings and trial new ways of marketing and presenting our products,” Harker tells Playthings. “All this helps us to better understand our consumers and the environment in which our retail trade partners operate.”

As is true for most companies, building brand loyalty with customers is vital to sustaining business—especially in an ever-fluctuating economic environment. And Harker believes that the Lego stores factor heavily in that equation. “To experience the [Lego] brand in such a setting is a powerful way to strengthen the emotional connection between the brand, products and the consumer,” notes Harker. “We believe this translates to a positive, lifelong sales relationship with our consumers, regardless through which retail channel our products are ultimately sold.”

And at a time when shoppers are being bombarded with promises of lower prices, better values and other deals of all shapes and sizes, a solid retailer/customer connection appears to be important now more than ever. “As the U.S. retail landscape continues to evolve and further consolidate, we need to ensure the Lego brand remains relevant and fresh in the minds of consumers,” Harker emphasizes.

Today, there are a total of 33 Lego Stores in operation, 23 of which are in the U.S.—five in California; three each in Illinois and New Jersey; two each in New York, Virginia and Massachusetts; and one apiece in Florida, Washington, Georgia, Colorado and Minnesota. Also establishing an international presence, Lego has 10 stores overseas, including five in the U.K., four in Germany and one in Moscow.

And 2005 looks to be a busy year for Lego Stores, both at home and abroad. This month [Editor's Note: February], the first franchised location reflecting the latest design concept will open in Dubai. In addition, the Lego store at Downtown Disney in Orlando, Fla., is undergoing a renovation and will re-open this spring.

Notes Harker, “We're very proud of the new design, and it already has been recognized, winning several international awards. However, it's the positive consumer reactions we continue to receive that confirm our direction.”