Retailers prepare for toy market battle
Target and Party City aim to lure shoppers now that Toys R Us is gone
Shoppers may be wistful for Toys R Us this holiday season, the first in decades without the kiddie wonderland. But they’ll have no trouble finding plenty of gifts elsewhere to tuck under the tree.
Retailers are jockeying for a bigger piece of the $27 billion toy industry, wooing customers with instore events, carving out more space for gizmos and games, and battling for exclusives that shoppers won’t be able to get anywhere else.
“Even though we’re losing a major player, we’re not expecting the year to be hurting by any means,” said Marissa DiBartolo, editor in chief of The Toy Insider, a toy review website. “If anything, consumers are going to have so many more options and so many more places to go to buy the toy that they’re looking for that it could have a positive effect on the overall industry.”
Toys R Us, which shuttered its last stores in June, generated roughly 12 percent of toy sales in the U.S. last year, according to market tracking firm The NPD Group. And the big store chains that put a dent in Toys R Us’ fortunes by wooing away shoppers are not overlooking those customers now that the toy giant is out of the way.
Target says that by the start of November, more than 500 stores will feature extra space to display items such as toddler-sized Mustangs and tractors or exclusives such as the Melissa & Doug Deluxe One Stop Shop Play Store. The retailer will feature more in-store activities this holiday season, such as a chance to meet characters from “Minecraft” and other games. And Target’s website has a new hub dedicated to toys.
Walmart, which had surpassed Toys R Us to become the largest toy seller in the U.S., has ramped up its toy focus as well, unveiling larger toy aisles in some stores, selling 40 percent more toys online and offering more than 300 products that can only be
Mattel’s global chief commercial officer
“It’s very rare
when you
have a
retailer of
Toys R Us’
size, in a
$20 billion
plus
industry ... go
away, so this
(holiday
season) is
going to be
an interesting
time for
everybody.”
Steve Totzke
bought at Walmart.
So lucrative is the potential opportunity to grab more toy shoppers this year that new players are entering or doubling down in the space.
“I will tell you that all channels are looking at playing with us this holiday season,” said Steve Totzke, Mattel’s global chief commercial officer, who noted that those outlets include grocery stores and drugstores along with online sellers. “It’s very rare when you have a retailer of Toys R Us’ size, in a $20 billion-plus industry ... go away, so this (holiday season) is going to be an interesting time for everybody.”
Mattel, home of Barbie, began cultivating a lesser emphasis on traditional toy sellers roughly a decade ago, Totzke said, adding that grocery chain Kroger has been one of the biggest sellers of Mattel’s Hot Wheels toy car line in the U.S. But this year, Totzke has noticed that “some other toy companies are starting to come into these channels.”
Party City, a supplier of party accessories and decor, began opening up 55 Toy City locations in September, most of them next to Party City’s seasonal Halloween City shops.
The temporary toy storefronts will stay open through the holidays. The company is also trying out selling a broader array of toys online.
“Party City’s new Toy City concept is a logical extension of our brand, one that allows us to leverage our existing pop-up store capabilities and capitalize on the ... space created with the closing of Toys R Us,” said Ryan Vero, Party City’s president of retail.
And membership warehouse giant Sam’s Club is offering more toys this year along with extra space to feature them.
Retailers like Sam’s Club, Walmart and Target are touting how they are the go-to for toys shoppers won’t be able to get elsewhere.
“A lot of manufacturers are creating products that are exclusive to each retailer,” DiBartolo said, noting, for instance, the ever-popular “Hatchimal.”
Among this year’s new “HatchiBabies,” “there are ... specific breeds that you can only get at Amazon. There’s one you can only get at Walmart, and there’s one you can only get at Target. So companies are finding really creative ways to bring people into specific stores, and we’re seeing more of that than ever before.”
Totzke said the desire for exclusives has been strong for at least the past decade, though there may have been a slight uptick in demand from toy sellers this year.
“Maybe it’s a little bit more this year, but ... the past few years, it seems to have been the trend,” he said, adding that Toys R Us had a significant exclusives program that other retailers are likely vying to emulate.
More broadly, Mattel has been zeroing in on stores within 5 miles or less of a shuttered Toys R Us, and after checking “what categories were performing well in those locations,” Totzke said, “we work closely with all of our retailers to understand what inventory ... would fit best in those stores.”
While the overall toy industry has experienced growth, major toy makers such as Mattel and rival Hasbro have struggled in recent years to adjust to a landscape in which old-school dolls and action figures compete for attention against digital games and gadgets. Toys R Us’ exit is also taking a toll.
Hasbro reported last week that net revenues dropped 12 percent in the third quarter to $1.57 billion, partly due to Toys R Us going out of business. And while Mattel had a $63 million profit during the same period, it expects gross sales to be down during the holiday season because of Toys R Us’ absence.
Still, Mattel’s Chairman and CEO Ynon Kreiz told investors Thursday that the impact of Toys R Us’ loss will likely wane next year. And the industry as a whole should be fine.
“The fact that one retailer is out of business doesn’t mean consumers will change what they do, what they con- sume and the toys they like,” Kreiz said, noting how other retailers are stepping in to fill the void. “We expect growth to continue in the industry.”
Hasbro’s Chairman and CEO Brian Goldner said in a statement regarding the company’s third-quarter performance that “the lost Toys R Us revenues are impacting many markets around the world.”
However, he said, “a growing array of retailers are now ramping new programs to take share this holiday season and we are well positioned to meet their demand.”
Among the retailers who are aggressively pushing back onto the scene is iconic toy emporium FAO Schwarz, which is opening a new flagship store in Manhattan next month.
It will be the retailer’s first freestanding location since it shut its doors in 2015. For the second year in a row, FAO will also have pop-up shops in such stores as Bloomingdale’s, Neiman Marcus and Macy’s this holiday season.