Small toymakers hurt most by Toys R Us exit

Large chain’s liquidation means less exposure for smaller brands

Roger Dreyer was about to get the chance of a lifetime — his Fantasma toy company’s Nuclear Neon Slime was going to get the sweet spot of being in the checkout lane of Toys R Us stores across America.

Then word came that the toy store chain was on the verge of going out of business. And “that (chance) ended as quick at it started,” Dreyer said.

Toys R Us’ announcement that it intends to liquidate and potentially close its remaining 735 U.S. stores is a blow to major toymakers. But it’s the small companies, like Dreyer’s, that will get hurt the most.

Toymaking giants Mattel and Hasbro counted on Toys R Us for a sizable chunk of their sales. But smaller brands often got a game changing amount of exposure when they were featured on the shelves of the chain, which had the space and year-round focus to promote lesser-known playthings.

“They were the one bastion where you could show the full line of your products at bricks and mortar and it’s going to be a shame to see them go,” says Neil Friedman, CEO of Alex Brands, a toy company based in Fairfield, NJ.

While Toys R Us is one of several retailers to carry his products, Friedman says that chain’s disappearance will take a much heavier toll on many of his peers. “There are many small companies that have gotten their start from Toys R Us and a very big part of their business was (there.) . .. It will be very difficult.”

Walmart and Target, the other key players in the toys space along with Amazon, are more likely to stock up on top selling gadgets and action figures than to take a chance on new products, says Ray Wimer, a retail professor at Syracuse University.

“They’re only going to carry the best selling toys and games,” he says. “They’re not going to experiment . . . So losing Toys R Us for the small toy manufacturer is a big hit for them.”

Fantasma Toys, a 17-year-old New York City-based company that specializes in magic products along with remote control spiders and various slime concoctions, sells its play items in a range of stores including Target, Kmart and Learning Express. But Dreyer, the company’s head, says Toys R Us gave him a wider berth, featuring seven of his products as compared to other retailers that just sold two or three.

“We’ve all supported them with the hope (they’d be) able to pull out of their bankruptcy,’’ Dreyer says of his fellow toymakers. Now that Toys R Us is not likely to survive, some of his peers are looking to smaller, independent retailers to step into the void.

But “the problem with the independents is that they are very demanding,” he says, “and are sometimes slow to pay the bills. So it will take a lot of these independent stores to make up for an 800-store chain.’’

But there may be good news for some. Dreyer says in recent days, he’s been approached by two large retailers that are looking to expand their selection of toys and are interested in featuring Fantasma products.

“Toy companies like us are going to be hurt for a short period,’’ he says. “But there are a lot of retailers that are now looking to capitalize on Toys R Us’ demise.’’