Who will fill the retailing void left by Toys ‘R’ Us?

Discussion
Photo: RetailWire
Apr 18, 2018
Tom Ryan

With Toys “R” Us exiting, Tim Hall, CEO of analytics startup Simporter and a former Hasbro executive, believes grocery stores could be well positioned to pick up the missing volume.

The regular traffic to grocers could support more off-season sales for an industry highly dependent on the weeks before Christmas.

“In a summer display, they might put swim toys by the sunscreen or next to beer coolers,” Mr. Hall told the Washington Post.

Writing for Motley Fool, Daniel Kline posits Toys “R” Us’s exit opening the door for Barnes & Noble to reemphasize and expand its toy line into more mass-market products. He contends Walmart and Target aren’t set up to upsell higher-end or lesser-known toy items.

A few articles have noted that independent toy stores may benefit from the chain’s demise. Many independents claim to be doing well by focusing on selling international and niche brands, being able to answer parents’ questions and letting kids try toys.

A March survey from Coresight Research asking Toys “R” Us shoppers where else they had purchased toys or games over the last 12 months shows that dollar stores, department stores, warehouse clubs, eBay, Five Below and Disney Stores could be other candidates to capitalize on some of the lost toy sales.

KB Toys is speeding up its relaunch to capture the lost share. Obviously, the big-three that crushed Toys “R” us over the years — Walmart, Amazon and Target — are expected to benefit.

Hope has appeared to fade that Toys “R” Us may come back as a result of a $675 million bid by a group led by Isaac Larian, founder of MGA Entertainment, after the retailer rejected the offer. The Wall Street Journal reports that Mr. Larian’s offer did not meet the threshold for bids established under the auction procedure approved by the bankruptcy court.

“The liquidation of Toys ‘R’ Us is going to have a long-term effect on the toy business,” Mr. Larian said in statement before his bid was rejected. “The industry will truly suffer. The prospect of bringing the Toys ‘R’ Us experience to a new generation, my new grandson’s generation, is enough to motivate me to save Toys ‘R’ Us.” 

DISCUSSION QUESTIONS: Which retailers and channels are best positioned to capture the volume lost by the exit of Toys “R” Us? What would be ideal for toy vendors and the toy industry? Do you see an opportunity for unconventional sellers?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
" Independent retailers are in a good place to fill this void. They are able to provide a top-notch in-store experience, which is crucial for toys. "
"The truth is that Target, Walmart, and Amazon are in prime position to pick up a lot of the spoils. Despite what the Motley Fool author claims..."
"There will be no Lone Ranger riding in to fill the vacuum left by Toys “R” Us."

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14 Comments on "Who will fill the retailing void left by Toys ‘R’ Us?"


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Mark Ryski
BrainTrust

Toys “R” Us’s demise leaves a gaping hole in the toy market. All retailers who currently sell toys will likely see some incremental pick-up as a result, but there is no obvious leader. As the article suggests, struggling retailers like Barnes & Noble could try to expand into toys opportunistically, but I’d be skeptical about this move – this is not a category they know well.

What we don’t know yet is whether some entirely new player will enter the market and start to re-build the category. And while the category is large enough to be attractive, I doubt that we will see a major brick-and-mortar pure-play toy retailer of the size and scope of Toys “R” Us for many years, if ever.

Max Goldberg
Guest

Mass merchants are best positioned to benefit from the demise of TRU. They already have toy sections, which are well known by consumers, and their websites can offer obscure toys that smaller retailers might not carry.

Ken Lonyai
BrainTrust
There will be no Lone Ranger riding in to fill the vacuum left by Toys “R” Us. It took many years (decades) for the brand to establish itself as an industry leader. No one can pick up the mantle and quickly do that without buying the assets of the company and making a massive effort/investment and that won’t necessarily work anyway. The industry has changed now. It’s a lesson for any vertical that is very dependent upon one brand/merchant to reach consumers. If that’s lost, the industry is shaken and it takes time for a reshuffling to take place, take effect, and create a new landscape that consumers are familiar with. Although the newly launching KB envisions itself as the best-positioned entity to fill the void, I believe the TRU market will be carved into many chunks with Amazon and Walmart investing in and taking sizeable pieces. The higher end and unique toy niches will likely go to independents, better positioning them against the giants. I believe any grocery store that follows Tim Hall’s advice… Read more »
Shelley E. Kohan
BrainTrust

The children’s and toy market have a significant amount of independent players who offer higher levels of one-to-one service which aligns with the mindset of today’s shopper. Additionally, the smaller stores offer curated and differentiated products which is a key retail trend for customers. In a recent interview, I discussed the state of the children’s market.

The other aspect which may cause a shift in specifically the toy business is the growing number of streaming video games which has captivated younger audiences (Fortnite for example). While the demographic of streaming games has a tremendous age range 8+ and up, this may take spend away from more traditional toys. The big players will compete on price (Walmart, Amazon, Target) while the smaller players will compete on service.

Ralph Jacobson
BrainTrust

Although the toy industry in general has been transforming for years away from the industry it was when I was kid, I believe there is still significant share to capture. Among the retail formats mentioned in the article, I still feel there is opportunity for both supermarkets and drug stores to grab some share. Forever, the toy sections in these stores have been an afterthought, if there was a section in the store at all. A proactive, intentional strategy to offer what is selling today, like gaming, etc., could be a great way to drive incremental revenue.

Meaghan Brophy
BrainTrust
Meaghan Brophy
Senior Retail Writer
1 year 6 months ago

Independent retailers are in a good place to fill this void. They are able to provide a top-notch in-store experience, which is crucial for toys. As the article points out, they can also offer local products and hyper-curate their selection to the community. I might be a little biased, but I’m really rooting for small businesses here.

Richard Layman
Guest
1 year 6 months ago

Probably a small segment of the TRU consumer base will shift to independent retailers, but not a significant number. TRU is about volume, discounting, the toy supermarket. People aren’t going there for the quality of the experience, as they would to an independent toy retailer. Walmart and Target are best positioned to be able to step in, if they want to. Grocery stores, I can’t see it at all, except for the companies like Kroger and HEB, which have formats that add GM goods to some of their stores (besides Fred Meyer, Kroger has the Marketplace format, and HEB has something similar). I suppose if Giant-Eagle can link up with ACE Hardware, someone could create a toy store equivalent.

Rich Kizer
BrainTrust

There is a great opportunity for current toy retailers as a result of the market absence of Toys “R” Us. I really believe that these retailers will do their best to attract the toy purchaser by expanding their inventories, where and when possible. But inserting more toys into the mix of a grocery store? That would be a tough assignment. Vendors fight, and pay for shelf facings, and I believe grocers will not be anxious with the opportunity to add additional toy items to their current mix, rapidly. However, I will not be surprised to see investment moves by retail companies already in the market to grab any opportunities left vacant by Toy’s “R” Us; and I will not be surprised when someone rolls out a new retail entry into the retail toy mix.

Steve Montgomery
BrainTrust

Toys “R” Us sales will be fragmented across a wide number of retailers. This may benefit the retailers, but not the manufacturers and/or toy customers. Toy “R” Us was a place people looking for toys knew they could find a very large selection of items in one place. With its passing, that is no longer true. Yes, Walmart, Target and a few others may increase their selection of toys, but it will still be just another department and not their reason for being. That is also true for other retailers who now seek to expand their selection or enter the toy market.

Neil Saunders
BrainTrust
Some of these suggestions are plain odd. Dollar stores — really? Maybe Five Below, but even that’s pushing it. Shoppers may have bought some toys there, but what they bought was different to what they would have purchased at Toys “R” Us. I can see the logic in Barnes & Noble, but it has a lot of work to do to pull in the ex-Toys “R” Us crowd. The truth is that Target, Walmart, and Amazon are in prime position to pick up a lot of the spoils. Despite what the Motley Fool author claims, there are very few products that Toys “R” Us sold that Walmart or Target would not sell. Both also have many stores in close proximity to shuttered Toys “R” Us shops. The remainder of the share will go to a whole host of other players, including independents. You’ll also see some other winners too: buybuy Baby, Burlington’s Baby Depot for baby products; Michaels, Hobby Lobby, AC Moore, and Jo-Ann for crafting; Gap Kids, Osh Kosh, Carters and so in clothing;… Read more »
Rebecca Fitts
Guest

I think online will certainly get its fair share of the uptick, but I wouldn’t count FAO Schwarz (reopening in Rockefeller Center soon) out of the mix, and I have to say this (perhaps wishful thinking), the independent local retailers, too. The category could also take a play out of some of the biggest game/toy concepts like Nintendo and pop-ups based on demand. The weight of overhead for the category can’t be denied.

Ed Dunn
Guest
1 year 6 months ago

I stopped shopping at Toys “R” Us in the 1990s due to the unnecessary long lines and the cashier asking for my phone number at the checkout in an assertive manner. The toy selection and bike selection was great; it was the point-of-sale where Toys “R” Us failed, and I believe anyone who learns from TRU’s mistakes will thrive.

Craig Sundstrom
Guest

None of us here (who answered the poll) seems to agree with Mr. Hall’s take on things, but I guess we’ll have to see.

I think a bigger concern for the toy industry is the loss of TRU as a promotional venue: the implication being that there was something of a showrooming effect with them “doing the heavy lifting,” so to speak, and then people actually buying at discounters or online. (Though how true that actually was I can’t say, since the same charge was originally leveled against them years ago by independent toy sellers.)

Kenneth Leung
BrainTrust

I am thinking it will be a combination of online like Amazon and Mass merchants like Target/Walmart and Independents. Amazon and other toy brands-specific sites will take over a part of the business. I can see Best Buy perhaps getting into some of the electronic based toy items. Target/Walmart mass merchants will take over the toys licensed to movies and entertainment properties that rely on short term volumes. Independents with high service offering and specialized areas such as educational will absorb some of the category’s volume.

wpDiscuz
Braintrust
" Independent retailers are in a good place to fill this void. They are able to provide a top-notch in-store experience, which is crucial for toys. "
"The truth is that Target, Walmart, and Amazon are in prime position to pick up a lot of the spoils. Despite what the Motley Fool author claims..."
"There will be no Lone Ranger riding in to fill the vacuum left by Toys “R” Us."

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