I do love the Toy Industry! Not only are they one of the nicest group of people, but their love of the industry is infectious. Perhaps it is because, as Steve Pasierb, President & CEO of the Toy Association has said: “We’re blessed to be in a business that brings joy to children and families each and every day.” So you may not be surprised to hear that they are upbeat and positive despite the many challenges that come their way.
Speaking of challenges, they are not insignificant:
- The demise of Toys R Us (TRU): TRU was a major part of the retail segment. It accounted for sizable sales and for some, significant losses when it went Chapter 11. Not only that, it was a vehicle for many vendors to get business due to its generous shelf space and its mission to represent a wider swath of toy companies.
- What I heard, per NPD, is that the business is now down for the year. It has previously been up, but that was due to TRU closeouts through a few channels.
- Cost of goods is going up due to inflationary pressure and, in some cases, tariffs.
- And the threat of toy tariffs hangs over the industry.
The good news is:
- Toy Vendors are marching on. Sure, budgets may be tightening for some, but they know they need to move persevere. They need to be smarter and more aware of trends, which speaks to Retail Analytics amongst other efforts.
- Other retailers are jumping in to fill the TRU void:
Per Jackie Beyer: “The loss of Toys R Us is having a tremendous impact on the toy industry. Perhaps surprisingly, not all of it is bad news. Toys R Us’ liquidation has spurred the launch of new toy retailers, the expansion of toy departments at major retailers such as Walmart and Target, and the introduction of toy departments at retailers who hadn’t carried many toys before.”
Backing up Breyer’s point, numerous retailers have made announcements this year about expanded toy offerings, including Amazon (the biggest player in the industry with $4.5 billion in sales in 2017), which announced it will be distributing a toy catalog in its Whole Foods subsidiary.
Additionally, Party City said it is opening toy pop-up shops (called Toy City) during the holidays and Barnes & Noble has dramatically expanded its toy department in its more than 600 stores. Plus FAO Schwarz is on its way back, beginning with a store at LaGuardia Airport in New York and an expansion plan that moves on from there, and KB Toys is coming back via 1,000 pop-up units for the holiday season.
Michaels is also joining the fray. Even Staples buyers were seen walking the aisles at Toy Fair.
- As for the rest of the issues, the Industry is working on contingencies and trying to keep the cost in line. Of course, they must see what their retail partners choose to do as well.
- Consolidation is also seemingly on the rise. In fact, just the Friday before the show, Basic Fun completed its acquisition of Playhut.
It was gratifying to see how many companies were doing well and how focused the industry is on rising to the challenges.