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Do We Need Toy Stores Anymore?
After performing its latest research, MarketWatch stated that the “Global Toy market size was valued at USD 65530.35 million in 2022 and is expected to expand at a CAGR of 7.5% during the forecast period, reaching USD 101159.97 million by 2028.”
This data primarily includes all of the major toy companies, brands, and manufacturers while accounting for current modern toys. With that high of a positive forecast, how then could a toy-focused company like Toys R Us have failed?
Unfortunately for the brand, Toys R US declared bankruptcy in 2017 and was forced to close all of its stores shortly after poor sales performance over the holiday season of that time. According to Business Insider, in March of 2018, Toys R Us explained how Amazon, Walmart, and Target cut prices on toys so steeply during the holidays the year before at “low-margins or as loss-leaders” that Toys R Us “could not compete.”
At its peak, Toys R Us operated 739 stores in the U.S. and over 750 abroad. Even though the retailer has made a comeback by opening up branded sections inside Macy’s department stores across the U.S., its future remains uncertain. This strategy is the same for brands like schleich, a character toy brand that houses its flagship stores inside other retailers’ locations.
At the height of competition between Toys R Us and other retail giants, each store would feature exclusive and limited-edition toys to try and level the playing field. Currently, Toys R Us offers only a limited selection of general toy merchandise that consumers can easily find at any retailer that offers an inventory of toys.
Toys R Us is also attempting to use its brand to its advantage by opening up stores inside airports and holding a traveling sweepstakes dubbed Geoffrey’s Tour Across America from July 20-29, 2023. The tour is limited to the East Coast and parts of the South without further plans to travel westward.
But is that enough to keep Geoffrey and company afloat? After all, Toys R Us does not offer its own original products, unlike Lego, which can operate its own stores.
An important factor to consider is how the toy industry has evolved and diversified from its top-performing segments of educational products and dolls for kids all the way to pricey action figures and art collectibles for adults.
This leads to other segments that professionals like MarketWatch might not have even considered: vintage used toys, independent toy makers, and art toys through specialty retailers.
According to CNBC, adults “are responsible for one-fourth of all toy sales annually,” and they “tend to spend more on toys,” and “have a great fondness for cartoons, superheroes and collectibles that remind them of their childhood.”
One example of a toy store that appeals to adults as well as kids is The Toy Department, an Ohio store that specializes in these nostalgia-style toys and is becoming one of the largest, if not the largest, dedicated toy retailers in the country.
After opening up five years ago as a reseller of vintage pre-owned toys, the business now carries a wide range of indie toys and relocated to a nearly 20,000-square-foot brick-and-mortar store. A building this large is unheard of for a modern toy store, but it still has a ways to go to match the previous 110,000-square-foot flagship store of Toys R Us. And this comes at a time when eBay has been seen as the dominating force when it comes to reselling vintage toys.
The loss of Toys R Us left others in the industry weary of their futures, and many have decided to adapt by modifying their toy stores to become experiential. According to Medium, a new store named Camp integrates toys into themed, interactive decorations and sets, and it “also hosts workshops and features a dance hall and a theater. Paying members enjoy extended hours and the average family of customers in New York spends about an hour to an hour and a half at a time in the store.”
Camp now has nine stores across the country, and they average between 6,000 to 7,000 square feet in size.
Discussion Questions
DISCUSSION QUESTIONS: Are the days over when a family strolls into a toy store over a Target, Walmart, or Amazon? Will experiential stores and sellers specializing in hard-to-find collectible toys be the only ways for toy retailers to compete against these retailer giants?
Poll
Loading …BrainTrust
Jeff Sward
Founding Partner, Merchandising Metrics
Neil Saunders
Managing Director, GlobalData
Toys-R-Us came back but never made a comeback. The idea that the relationship with Macy’s was to be the anchor for resurrection was foolish at best.
There are exceptionally successful toy stores. Amazon, Walmart, and Target come to mind.
Experiential toy stores are a fine idea. I remember back in the ’50s, we would go into NYC every Christmas season, and the key stop was the Toys-R-Us stop at 57th & 5th. In the ’70s, when my kids visited their grandpa, there was always a trip to the local big box TRU. They danced on the piano. Ten years ago, I took my grandkids to the flagship TRU. We didn’t buy anything, but we sure had fun.
The question for these smaller retailers is, “Will experiences trump convenience?” My observation is “No.”
the key stop was the Toys-R-Us stop at 57th & 5th
I believe you mean FAO Schwartz. Now there was “iconic”…
I’ve always thought of toy stores as offering a huge experiential opportunity. The “Explore + Experiment” factor is potentially enormous…!!! And the Toys R Us shops tucked in a corner of Macy’s are a bare minimum at this point. Remember walking through FAO Schwarz for the first time? Yikes! The key is always in product curation and in-store execution. Don’t LEGO and Build-A-Bear continue to prove that? The equation holds. Explore + Experiment + Execution = Experience³. It’s more than a simple sum of the parts. It Exponential.
Is experiential scalable?
Sure. I think Target is a perfect example. Target offers a shopping experience superior to most retailers. No single product is jaw dropping or amazing, but the breadth of product, the curation in each department, the ease of shopping and checkout, the ancillary services, the time efficiency of having it all under one roof…all add up to a superior shopping experience. It’s doesn’t have to be on the scale of replicating a FAO Schwarz flagship to a hundred locations. Target out executes the competition…consistently. They offer a great mix of high demand national brands and well executed proprietary brands. It all adds up to a great experience.
Do we need toy storeS anymore is an interesting question. Camp is wonderful but it’s not meant to be a traditional toy store. Toys ‘R Us at Macy’s is a place holder. In some stories there is an exciting breadth of product and merchandising, but in others it’s just a mess. And neither captures the pure joy of a trip to a Toys ‘R Us stores of old.
I feel sad for kids who will never know how cool it was to visit TRU. Because it was a memorable experience to explore those aisles and walk out with something you knew was special. It’s just not the same anywhere else.
Niche toy stores – for example, those that focus on eco-toys or handmade items – continue to do well. However, the problem with the mainstream toy market is it is very driven by price and convenience, which are very important for parents. Both of these things are delivered on by general merchants like Amazon, Target and Walmart – who for their own various reasons put a lot of effort into toys to court the family shopper. Against this backdrop it is hard for others to compete. An extensive range, being a fun and engaging destination, and being on kids’ radars can all help provide differentiation. This is what Toys R Us used to do before private equity ruined it and it lost its way.
There will always be room in the market for local toy stores that offer higher end toys and hobby supplies that are not always available at Target, Walmart and other big box stores.
Hopefully, there are enough consumers – baby boomers, that look to relive their experiences when they were kids.
I have an expression that may be applicable here: “You can make it for class or make it for the mass, but you can’t do both.” The class market is represented by those market-focused retailers offering niche products. Online retailers own the mass market. Unless the bricks & mortar toy store has a differential advantage their future is uncertain.
I’m throwing a virtual temper tantrum; ok, not really. There is a lane for toy stores for sure, retailers just have not figured it out. Today’s kids are programmed to play with digital devices and engage less in the physical realm. It is cultural and systematic. Long gone are the days when the neighborhood played on the block til dusk. Perhaps this is why adults are driving toy sales with nostalgia. Multi-tainment seems to be the path forward. Barbie is a great example.
There will always be days when kids want to interact with toys in real life, so there will always be an opportunity for toy stores, especially independent stores to provide that hands-on experience. Scaling to 1000 stores does not necessarily mean success. Gepetto’s in San Diego has 9 stores and every family and child in this metro knows this toy store and it is a destination to find something unusual, something unique for that special little one. This example demonstrates that well-run small/medium toy chains, with engaging retail associates and curated assortments still have a place and can succeed against the giants.
The article author should have visited the ASTRA Marketplace & Academy annual conference, held last month in Columbus, OH. Independent toy stores (just like indie book stores) adapted over the pandemic and did not just survive but blossomed, with a higher store count now than in the Before Times. Experience, curation, and local knowledge make all the difference – meaning you will see city-wide chains like Geppetto’s or Henry Bears Park but mostly one-two location operations: no one in the industry wants to become the next TRU because “Corporate is where fun goes to die.” An owner/shopkeeper can flex between books, games, clothing, construction, education, etc. to create a unique and defendable position for her community, backed up with events and party rentals to maintain a relationship from childhood into adulthood – would a Walmart ever do that?
It’s a tough question. My kids love going to toy stores, whenever we come across one they spend so much time exploring and it usually translates into some purchase, even if it’s a small one. When we are overseas, we love visiting Hamleys, that’s such a fun store.
I think my fellow panelists have it right. There will always be a place for toy stores but the masses might visit them on occasion but make their purchases as Target, Walmart, Amazon, etc.
I think if there was a toy store with a Best Buy + Public Lands type of experience, I am thinking showroom with easy ordering, it could scale. Speaking to the demise of Toys R Us, financial problems sunk the ship but they had no brand vision and lost their way in terms of standing for something. Who knows, maybe someone will figure out a compelling model that scales.
I think trying to compete by breath of selection is no go for any independent toy retailer against both Target Walmart on one side and Amazon for online. Only path forward is a niche against a segment that requires you to visit the store to experience it with curated selection. Lego stores will be around, collectibles stores like those focused on anime or comics still work out. Those that can focus on regional or local artist items will work, otherwise the Toys R Us model just doesn’t scale any more.
What a question! Do we need to breathe?? OK, bad comparison: toy stores are more important! The answer to the question posed in the headline, if not the discussion points, is “yes”, just as we need specialized stores in every line of product. That doesn’t mean they will have the majority of sales; I doubt toy stores have had a majority of toy sales in our lifetimes (before discounters it was department stores). But to answer the implied question – do we need Toys R Us ?? (one of RW’s seeming obsessions): probably not. Ultimately they seemed to exist in a no-mans land of both too big (to offer a customized experience) and yet too small (to have the market power of the three retailers mentioned).
The toy store market is nowhere near the same as it was. It will be highly challenging for another Toys R Us-like operation to scale up in 2023 and beyond and attempt to compete with the likes of Amazon, Walmart, and Target. While the Toys R Us eternal kid in me wishes the brand was still around, the Father of two kids and Retail Strategist in me knows those nostalgic days are behind us.
While the Toys R Us and FAO Schwarz comebacks did not live up to the hype, especially the store-within-a-store collaboration with Macy’s, there is room for experiential store and specialty operations. There is no need to scale up hundreds of experiential retail stores, as they will quickly run into the same challenges that other retailers experience, with too much inventory, unprofitable locations, and increased operational costs.
As the Lego stores have proven, experiential retail has its place. By curating their locations, there is an element of exclusivity and intrigue when parents take their kids out for a day at the Lego Store or Legoland.
Are the challenges faced by toy stores any different from retailers in other industries? Every decade or so, the retail industry evolves in the same way that our own society does. Over the course of a decade, the retail landscape undergoes constant transformations, making agility a vital trait for thriving in today’s business world. One thing that hasn’t changed is the emotions that drive customers to buy toys. Consequently, toy shops and manufacturers will continue to thrive as long as they build an emotional bond with their customers.
Back in the day, things were more linear. A physical store was adequate to run a profitable business, with transactions solely based on commodity exchange between customers and retailers. Nowadays, it needs far more than that, because buying experience is extremely important in today’s world. If retailers can connect emotionally with their customers, they can sell their merchandise to any segment.