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  1. #1
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    Important information for those running KB Toys / Etoys:



    KB Toys Cuts Payments to Suppliers-Report

    NEW YORK (Reuters) - KB Toys has stopped paying some suppliers in an attempt to keep more cash on hand, the New York Post reported on Friday, citing two people familiar with the situation.
    The move, unusually timed because manufacturers typically begin collecting money for holiday shipments in late December, could make manufacturers less willing to extend credit to KB in the future, the sources told the Post.

    A spokesman for KB, which is owned by private equity firm Bain Capital, could not be reached for comment.

    With 1,300 stores, KB is one of the top five U.S. toy retailers, but it is among those that have been squeezed by the mass discounters in the pricing wars this holiday season, according to industry experts.

  2. #2
    Full Member ellen-s4y's Avatar
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    Lovely - and they pulled a "Buy now, Pay Later - 90 days same as cash" promo this year as well.

    That can't be helping the bottom line.

  3. #3
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    Thanks for the info.

  4. #4
    2005 Linkshare Golden Link Award Winner  ecomcity's Avatar
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    Look KbToys/eToys have pulled non-paymnet ...swapped networks at Christmas and turned off their reporting on more then one occassion. Look for them to pull out of CJ ...go indy and stiff affiliates one more time. What do you expect with Ad Whores at the helm of their program and a VC bankrupsy hawking outfit calling the shots.

    Mike & Charlie ...

    If they won't adopt and feed a bird ..flip them one! BBQ some Gator and remember to flush WhenU..

  5. #5
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    Actually all toy retailers are getting nailed, with FAO Shwartz filing for bankruptcy... at least you can get some amazing deals at zany brainy.

    Chet

  6. #6
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    All this talk meakes me leery of them. They've been one of my biggest sales producers so far this Christmas. I did notice something peculiar. I've had multiple sales nearly every day until the 19th. Then zip...zilch...zero...nada. I looked and it appears as if they did their txns on both the 19th and 20th....but no sales for me. Strange in view of the fact that my click-thrus haven't slowed for them.

  7. #7
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    NEW YORK (Reuters) - Toy retailer KB Toys Inc. on Wednesday filed for bankruptcy on the heels of a soft holiday shopping season wrought by harsh competition from bigger rivals, according to court papers.

    KB, controlled by the private investment firm Bain Capital, is the second major toy chain to fall into bankruptcy in about the past month. FAO Inc., parent of the iconic FAO Schwarz toy-store chain, in December filed for Chapter 11 bankruptcy protection for the second time in a year.

    KB filed its Chapter 11 petition in the United States Bankruptcy Court for the District of Delaware.

    The holiday period is usually the big money maker for toy retailers, but this latest season brought severe competition as Wal-Mart Stores Inc., Target Corp. and other major players slashed prices to lure customers.

  8. #8
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    so what does that mean?? they have not been deactivated yet with cj???

    will they reverse everything???

    *** And people say I'm just a housewife!!! ha ha ***

  9. #9
    Affiliate/AM Moonlighter dflsports's Avatar
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    x10 filed bankruptcy and remained active at CJ, so they may stay but I bet you'll see lots of reversals.

  10. #10
    2005 Linkshare Golden Link Award Winner  ecomcity's Avatar
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    ...."so what does that mean??"

    It means listen to this duck and pull links when I first post on who's headed south. 6 years and never once had a bad call on a lame merchant heading for Pud's Hall of Shame. I notice Pud's demographic has made his site into a POS.

    Mike & Charlie ...

    If they won't adopt and feed a bird ..flip them one! BBQ some Gator and remember to flush WhenU..

  11. #11
    Moderator MichaelColey's Avatar
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    All of my December KBtoys.com sales show as "Locked". I don't believe they could reverse or extend them even if they wanted to.

    One REALLY nice thing about CJ is that merchants have to maintain a balance at CJ to cover their affiliate commissions. It really limits our exposure.

    I'm keeping my KBtoys.com links up for now. If they get deactivated at CJ, I'll pull them and redirect the links to Toysrus @ Amazon.

    Michael Coley
    Amazing-Bargains.com

  12. #12
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    I believe that bankruptcy laws will protect KB, so CJ wouldn't be able to deactivate them. KB would probably have to take that step, which is probably not likely.

    I'm not a lawyer (thankfully ;-) ), but I'd say don't expect them to deactivate any time soon.

    Let's hope the folks at KB will send a communication to affiliates on what they intend to do.

    In the meantime, consider this: Wal-mart (offline) is the largest toy seller in the country. How's KB or FAO going to compete with them? Will they be able to re-emerge with a business model to survive? Let's see what happens to Toys R' Us...

  13. #13
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  14. #14
    Merchant Linda's Avatar
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    quote:
    Originally posted by MichaelColey:
    All of my December KBtoys.com sales show as "Locked". I don't believe they could reverse or extend them even if they wanted to.

    Michael Coley
    Amazing-Bargains.com


    Not quite true, Michael.

    All my December transactions were in Locked status yesterday. When I looked just now, ALL my KBToys and eToys are in Extended status.

    And they are both listed on the Extended transactions due to non-payment report.

  15. #15
    Full Member ellen-s4y's Avatar
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    Mine too. I think it's time to start deleting.

  16. #16
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    Other merchants have unlocked transactions before.

    Locked just means they are locked unless they get unlocked. It is not like the throw away the key.

    They could even come back after paying and demand it back.

    There is no telling what the bankruptsy court will decide.

  17. #17
    Moderator MichaelColey's Avatar
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    CJ ... They're supported to be the trusted third party that REQUIRES merchants to maintain a balance. The fact that they reversed the Locked status (probably to keep the money to cover THEIR fees for this month) is inexcusable.

    Why do they even have an "Extended Transactions Due to Non-Payment Report"? There should never been a non-payment. Merchants need to be CUT OFF the second their accounts go negative.

    So much for CJ providing additional assurance for affiliates...

    Michael Coley
    Amazing-Bargains.com

  18. #18
    ABW Ambassador qball0213's Avatar
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    This is ridiculous, six days before payday, my expected payment has just dropped 2000 dollars, with over 1000 of it being kbtoys and etoys. Let them extend it CJ, so they can reverse them all next month.
    50,000 dollars worth of sales reversed CJ. Burn me once and I guarantee it'll never happen again, because my sales will be somewhere else.
    I guess their TOS should say, will pay you unless someone declares bankruptcy, or they work with parasites, or their AM has his head up his ass, or they don't want to spend the money, have I missed any?

  19. #19
    ABW Ambassador qball0213's Avatar
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    Just recieved this reply from CJ:
    We are aware of the KBToys situation and will work with them to achieve a resolution. Obviously, it is still early in the situation so I do not have many details, but in our past history with bankrupt companies is that the commissions have all been paid. Since they are filing chapter 11, they are not going out of business and because they value our network so highly they make sure that the debt they have to us does get paid. Bankrupt advertisers have not wanted to risk angering their publishers by failing to make good on their commissions. I cannot say for certain that this will be the case with KBToys, but history is most definitely in your favor. I imagine there will be a decision made in the near future, so I would just be sure to keep an eye on the situation for any updates. Please do not hesitate to ask if you have anymore concerns about this matter.

  20. #20
    ABW Ambassador buy_online's Avatar
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    "KB Toys has stopped paying some suppliers..."

    That wouldn't be affiliates would it? - Naw, they wouldn't do that.

    And how many are thinking of keeping them on, in the hopes that they might pay?

    Fred

    Are you sure the nurses know you're using the computer?

  21. #21
    Merchant Linda's Avatar
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    I have always been under the assumption that merchants were required to pay CJ in advance to cover their CJ monthly fees and expected affiliate earnings. And that CJ cuts the merchant off if his reserve runs dry and it's not replenished.

    I don't think I have ever had a merchant leave CJ (whether advance notice was given or not) or file bankruptcy where my earnings were NOT extended. If merchants are required to have a reserve fund to cover their fees and commissions, then why are any transactions ever extended due to non-payment?

    As soon as I saw the post yesterday about them filing bankruptcy, they were gone from my sites. For once, I'm glad I didn't earn as much from them this Christmas season as I did a year ago.

  22. #22
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    Maybe CJ has the funds but the assets were frozen when Ch.11 was declared. Just one possibility.

  23. #23
    ABW Ambassador Akiva's Avatar
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    Godd point Jim. Many companies pay CJ in advance based on an estimate and it could be that CJ hadn't processed the payment yet.

  24. #24
    Moderator MichaelColey's Avatar
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    quote:
    From the CJ reply that qball received:
    in our past history with bankrupt companies is that the commissions have all been paid.
    CJ has had much better success with bankrupt companies than I have. I've never received 100% of what I was owed. Usually, it's NOTHING. Of the ones that did pay, it was often 10-20%. I'm still getting payments from the eToys.com bankruptcy. When was that? Three years ago?

    Oh well. At least KBtoys was less than 1% of my income.

    Michael Coley
    Amazing-Bargains.com

  25. #25
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    I did warn you...


    Letter from KB Toys:



    January 20, 2004

    Dear Valued Affiliate Partner:

    We wanted you to hear directly from us about an important announcement involving KB Toys, Inc., the parent company of KBtoys.com and eToys.com.

    KB Toys, Inc. and its affiliated companies filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware for reorganization under chapter 11 of the U.S. Bankruptcy Code. This was a difficult decision, and the Company explored a wide range of alternatives before making it. However, taking into account the various interests of its stakeholders, the Company determined that reorganization under chapter 11 was the preferable alternative, and the right course of action for the long-term future of KB Toys. The chapter 11 process will allow the Company to achieve an orderly and timely restructuring, reduce its debt, benefit from improvements in operations and merchandising, and seize opportunities presented by the continued growth of the specialty retail and online markets.

    KB Toys' decision to reorganize under chapter 11 was driven primarily by the price war very early in the 2003 holiday season, mass merchants' increasing use of toys as loss leaders during the holiday season, and increasing price competition in the toy market during the remainder of the year. The Company experienced a rapid decline in its liquidity resulting from below-plan sales and earnings performance in the fourth quarter of 2003.

    The Company has secured a $350 million senior secured debtor-in-possession ("DIP") financing facility from a group of lenders led by Fleet Retail Group, Inc. The Company also may, subject to certain conditions, convert the DIP facility into post-chapter 11 financing, and the facility has a four-year term including the period during which the Company is in the chapter 11 process. This post-petition financing, along with cash flow from the Company's operations, ensures that KB Toys will have adequate resources to purchase merchandise and fund operations throughout the reorganization and financing in place upon its emergence from the chapter 11 process.

    Unfortunately, federal law prohibits payment for goods and services received before the January 14, 2004 filing. The Company may not pay this pre-petition debt until after the creditors approve and the Court issues an order accepting a plan of reorganization for the Company. We regret any hardship you experience in connection with these actions, but we encourage you to focus on the opportunities that lie ahead, as we do everything possible to continue to work together productively in the weeks and months to come. The relationships that we have with our affiliates are very important to the future success of KBtoys.com and eToys.com, and while our parent Company cannot promise what amount will be paid on pre-petition trade claims, we will do everything we can to achieve a maximum recovery.

    We believe it is in our mutual best interest for KB Toys to continue operating at maximum capacity. The daily operations of our stores and online company will continue, and the Company intends to be competitive in its markets. To do so, however, we need to continue to grow our online business through our valuable affiliate partnerships.

    Beginning on January 15, 2004, KBToys.com & eToys.com payment terms to Commission Junction were changed from credit to Minimum Balance Amount. Whenever our balance is less than $500, we must immediately remit a payment to Commission Junction in an amount at least equal to any negative balance and an amount sufficient to restore the Minimum Balance Amount. We believe this approach addresses the concern Publishers may have regarding our ability to make future payments to them. We value your relationship and look forward to a continued affiliation.

    KB Toys will continue to do its best to keep you fully informed of developments relating to the Company's reorganization process. The Company established a website at www.kbtinfo.com that it will update with Bankruptcy Court materials. You also may contact us at 1-413-496-3350 for further information or questions.

    We look forward to continuing our relationship and thank you for your support during this challenging time.

    Sincerely,

    The KB Toys Team

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