Playing to Win

With the holiday season coming up quickly, it seems like a good time to take a look at what toy industry players are doing to position themselves for success. In the midst of a changing retail landscape, evolving leisure time habits among kids, trade and tariff concerns, and other challenges, companies involved in the production or sale of toys are hoping the following moves will contribute to success in the fourth quarter and beyond:

  • Mass merchants are doubling down on the toy category. Target has recently opened 25 in-store Disney mini-stores (with 40 more planned for next year), which offer toys as well as apparel, collectibles, and home goods. One hundred of the 450 initial items were previously sold only at Disney’s stores. Target also paired with the new Toys ‘R’ Us to fulfill its just-relaunched website and its two just-opened experiential stores. Meanwhile, Walmart paired with Eko for an interactive “leased floor” called the Toy Lab at the latter’s KidHQ site for the second year, allowing children to test and experience a limited selection of toys online. It also announced a 25% increase in toy exclusives this year as well as 40 SKUs tied to kid influencers. Amazon continues to strengthen its position in toys as well. More than a third (34%) of former TRU shoppers say they are most likely to shop at Amazon for toys these days, according to Criteo, followed by 31% who say they are most likely to shop at Walmart and 18% at Target.
  • Toy-specific retailers are trying to make a comeback. Toys ‘R’ Us teamed with b8ta to launch experiential stores in New Jersey and Texas that offer STEAM workshops, play areas, a movie theater, opportunities to test toys, brand-sponsored displays, and kiosks to purchase goods online. TRU’s new website offers articles and videos about hot brands and toy trends, as well as product reviews and hot toy lists. Both online and at the in-store kiosks, shoppers are redirected to Target for ordering and fulfillment. TRU also paired with Candytopia to created Toys ‘R’ Us Adventure playrooms, which have popped up in Atlanta and Chicago to date. Separately FAO Schwarz has partnered with China’s Kidsland for retail stores including a Beijing flagship, as well as opening new stores in London and Dublin, and has increased its presence in the travel retail channel. And Camp, a new chain of interactive play spaces that also sells books and toys, expects to debut its third location (its second in New York, with one in Dallas open as well) by the end of the year.
  • Toy marketers are testing new strategies. Lego is increasing its own-brand stores by about 150 this year (a near-40% increase) to help it compensate for the loss of Toys “R” Us and BR Toys, a key player in northern Europe, and to strengthen its presence in territories such as China, where almost half the openings are occurring. Mattel opened a “leased floor” in Eko’s KidHQ, similar to Walmart’s venture, for Barbie, while Schleich is offering retail experiences at Toys ‘R’ Us Adventure playrooms. Longer term, Mattel is fostering a number of entertainment properties based on its brands, after opening an entertainment studio, while Hasbro’s recent news includes its purchase of eOne, bringing Peppa Pig and other properties into its portfolio. Consolidation among toy marketers continues as well. Most recently, Jazwares owner Alleghany Capital announced it would buy Wicked Cool Toys, while Jakks has endured three takeover offers this year (none successful to date), including from Alleghany. MGA Entertainment also considered purchasing Mattel for a time earlier this year.

The NPD Group estimates that total dollar retail sales of toys in the U.S. will decline modestly in 2019—due to a “lingering and minor evaporation from the loss of Toys ‘R’ Us,” it says—before picking up in 2020 and 2021. It will be interesting to watch the impact of the moves described here, among others, on sales at the individual toy companies, as well as industry-wide, during the holiday season.

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