Has American Girl made a wise move into Toys ‘R’ Us?

Discussion
Photo: American Girl
Sep 01, 2016

After years of being available only online, in catalogs and in its handful of “experiential” shops, American Girl, owned by Mattel, will start selling in select Toys “R” Us stores beginning in late October.

American Girl shop-in-shops — measuring up to 700 square feet — will open in 97 select Toys “R” Us locations across the country. More mini-shops will open in 2017.

At physical retail, American Girl has been only available at the brand’s 20 proprietary flagships in major cities. Many of the locations include eateries where girls can hold tea parties as well as salons where stylists do the dolls’ hair and pierce their ears.

The mini-shops at Toys “R” Us will feature an exclusive selection of American Girl’s Truly Me dolls and accessories. The contemporary 18-inch dolls come in a wide range of skin, hair and eye color that often match the children who play with them. The mini-shops will also carry the brand’s new WellieWishers line, which are smaller, about half the price of its classic dolls, and aimed at slightly younger girls (five-to-seven year olds).

The mini-shops will not carry the BeForever line of dolls based on historical periods in American history that the brand is best known for.

American Girl President Katy Dickson said in a statement that the move comes after years of urging from girls and their parents to increase access to the brand. She said, “Partnering with a top retailer like Toys “R” Us allows us to meet our customers where and when they want to shop and to take our timeless life lessons to even more girls.”

The move is also meant to reverse a decline in American Girl’s sales, which fell eight percent last year and 19 percent in the first quarter. The performance of the Truly Me line has been particularly disappointing.

American Girl’s positioning faces risks in shifting from exclusive to mass selling. Speaking to the Wall Street Journal, Jeffries analyst Trevor Young said he believes the “expanded distribution would more than offset potential margin pressures.”

Discussion questions: Do you see American Girl’s move into Toys “R” Us as long overdue or too big of a risk to its premium positioning? Are there any guidelines to gauge if a brand is over or under distributed?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Perhaps they've already strayed too far from the exclusivity and luxury experience that made them so successful"
"Obviously, the recent sales declines are prompting American Girl to seek other distribution options."
"American Girl has a good experience, but what if, increasingly, it is the wrong one?"

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20 Comments on "Has American Girl made a wise move into Toys ‘R’ Us?"


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Chris Petersen, PhD.
Guest

As a father and grandfather who has bankrolled a number of American Girl purchases, I can unequivocally state that it’s all about the experience.

A very unique aspect of American Girl is that it’s not just a doll. Each doll has a unique story. That story that engages the girls and their parents in a dialog and process of selecting the “right doll.” That process is completely different from purchasing a doll off the shelf at a mass merchant.

The American Girl flagship stores CREATE an experience that can’t be replicated in mass retail. But there are only 20 of them, so Mattel is naturally looking for the magic of “distribution” to bolster sagging sales, Toys “R” Us is the logical choice.

However, the real question is, what will be the American Girl experience in a “shop-in-shop” that will never have the staffing of a flagship store? There seems to be a high risk of denigrating the brand if the American Girl dolls are merchandised in traditional ways and sold as commodities off the shelf.

Dick Seesel
BrainTrust

Yes, Toys “R” Us is the biggest big-box toy chain by far (not counting the huge sales at Walmart and Target) so it’s a tempting decision for American Girl. But I think it cheapens a premium brand, and there may have been other ways to drive broader distribution (and more sales). For example, wouldn’t a traditional department store like Macy’s be a suitable home for American Girl shop concepts?

Bob Phibbs
BrainTrust

First it was Sears taking their few recognizable brands into other retailers. Yesterday we heard of J.Crew putting their merchandise in Nordstrom.. And now American Girl putting theirs in Toys “R” Us. I get it for stockholder needs.

But the blurring of lines does not help you compete, if anything it shows just how bad you are. That 19 percent drop in American Girl merchandise isn’t gonna be replaced by putting dolls that don’t sell into more locations. Perhaps they’ve already strayed too far from the exclusivity and luxury experience that made them so successful. Coming out with half price editions doesn’t seem a novel or bold move.

Dave Wendland
BrainTrust

Well said, Bob. Increasing distribution through new channels does not always raise value. And, in this case, I suspect American Girl dolls will require new levels of discounting to move fast enough to warrant space in a box store like Toys “R” Us, thus reducing the brand’s appeal. Time will certainly either prove or disprove my prediction.

Camille P. Schuster, PhD.
BrainTrust

While more people will be able to see and touch the dolls, the experience of creating/purchasing the doll will be different. This approach also sets up the potential for creating two tiers of customers. Execution will determine whether this happens and whether it has a negative impact on the brand.

Richard J. George, Ph.D.
BrainTrust

Obviously, the recent sales declines is prompting American Girl to seek other distribution options. However, it does run the risk of becoming a toy discounter brand versus its premium positioning generated by its experiential flagship stores. I am always reminded that you can make it with class or make it for the mass, but you can’t do both.

A potential analogy is the Izod Lacoste brand which enjoyed success as a premium brand sold in separate “Izod Lacoste” shops at upscale department stores. In an effort to increase sales the company expanded distribution beyond the noted exclusive channels. As a result, Izod Lacoste lost its target market, sales plummeted and the upscale position or void was filled by Ralph Lauren’s Polo. This is a classic example of how changing one aspect of the marketing mix affects the brand’s image and positioning. American Girl would be well served by reflecting on the Izod Lacoste lesson.

Anne Howe
Guest

I would have guessed that American Girl could have gained more sales and kept the experience intact by using a VR platform on a website. The charm of American Girl dolls is in the premium experience, which will be very unlikely to translate into Toys “R” Us. Pressure from girls and parents to expand access is not really an insight. I see this as a shareholders move too!

Lee Peterson
BrainTrust

This falls under the “You know an iconic brand is dead when … ” category. It’d be like selling Ralph Lauren to Walmart. American Girl should have a seance with Nancy Reagan: Just Say No.

It’s kind of amazing to me that the new American Girl execs don’t get the fact that the difficulty in terms of access actually increases brand cachet and therefore allows for higher margins and continued quality. What they should’ve said is, “Because we’re under pressure to make more profit dollars, we’re going to sell out and put our timeless brand in a dying retailer. This will give management in the future the chance to be compared to an overpriced Barbie collection as our quality goes down with sales.”

They probably won’t say that though, huh? Too bad, as you know honesty really works with Millennials.

Steve Montgomery
BrainTrust

When a customer enters one of the American Girl stores they enter a different world. A world where they are immersed in the American Girl experience. Like many, I know people who when traveling to Chicago make a special trip to the Michigan Avenue store to buy one.

When you enter a Toys “R” Us store you enter a large toy store engaged in the mass display and selling of a wide variety of toys. While it is a good store to buy toys, it is nowhere near the same type of experience. True the customer will still walk out the door with an American Girl doll, but the memories of the process will be no different than buying a bike or some other toy. From Mattel’s point of view they will sell more dolls but in the process will have denigrated the brand.

Nikki Baird
BrainTrust
Nikki Baird
VP of Strategy, Aptos
6 years 8 months ago
As a parent who now has two carefully wrapped and preserved American Girl dolls sitting in her garage waiting for the next generation, I am of two minds about this question. One, I agree — it’s all about the experience. There is an American Girl store at my local mall, and not only is the store itself an experience but several of the restaurants around the store also offer doll-related experiences, like special dining options for families out for a trip to the store and doll-sized seating at special tables in the restaurants. But I’ve also seen a lot of knock-offs of American Girl dolls, ones that are exactly the same size but just “not exactly” the same quality or level of detail. If you care about the stories and the brand and the detail (and don’t care about the money), then no matter where American Girl is sold, the knock-offs will pale by comparison — most especially by a direct comparison. So if Toys “R” Us is going to sell American Girl-sized dolls no… Read more »
Ryan Mathews
BrainTrust

I see it as a risk. Limited availability is a critical component of the American Girl aura. Take that away and part of the brand allure goes away with it. At best you create two classes of customers: real, authentic customers who travel to American Girl stores and faux, aspirational customers who can only access a limited downmarket assortment at Toys “R” Us. Premium brands flourish in part because they are deliberately under-distributed. It’s a lesson somebody at American Girl ought to pay attention to.

Lyle Bunn (Ph.D. Hon)
Guest

You go Girl — full speed ahead! When a brand defines itself as a “movement,” transition to include a wider base of people is essential. The cachet may erode slightly, but this cost, against the benefit of more people aligning with and amplifying the brand, is a risk to be managed. There is plenty of brand equity to draw upon, and this should be leveraged as a seed that can produce thousands more seeds. When your product is “inspiration,” go as fast and big as brand equity allows.

Larry Negrich
Guest

Shop-in-Shops has been successful for many retailers and allowed them to gain exposure to additional shoppers and benefit from the heavier foot traffic of the host. American Girl should position these shops as a step towards the full American Girl destination experience, not as a replacement.

Patricia Vekich Waldron
Staff
Patricia Vekich Waldron
Contributing Editor, RetailWire; Founder and CEO, Vision First
6 years 8 months ago

So American Girl will be the next Michael Kors? So much for experience and exclusivity for the brand.

Naomi K. Shapiro
Guest

So I understand that this can go either way: Stay exclusive and maintain the “experience,” which sounds extra-special. Mass sell, which is another way to move product, but without the aura. I don’t fault American Girl for this move, but these are two very different approaches which will have two different long-term results — and the company should be prepared for this outcome. (Maybe American Girl can benefit from an “after the fact” experience, i.e. make the purchase at Toys “R” Us and then direct the doll recipients to the internet for ore information and background — and maybe a whetted appetite to return to buy more.

Mark Price
BrainTrust
Mark Price
Chief Data Officer, CaringBridge
6 years 8 months ago

If you are going into mass retail, American Girl is doing it in the right way. Do not offer the core brand, but keep it for your higher end retail channels. Offer lower priced sub brands and accessories at the mass retail level. In this way, you can keep the brand still prestigious and have access to the volume available through a mass retailer like Toys.

Ken Morris
BrainTrust
Ken Morris
Managing Partner Cambridge Retail Advisors
6 years 8 months ago

I think this is a smart move for American Girl. With declining sales and limited distribution, it is difficult to make a big impact without a bold move. The timing for this move is also perfect, as it will cause more excitement for the dolls right before the holiday season.

While limited distribution can make a brand “exclusive” because it is hard to get, it also limits sales opportunities. American Girl can still maintain a premium brand image by keeping its price point high and refraining from discounting. Most of the dolls are more than $100, which definitely falls in the premium category for toys/dolls.

The other benefit of opening the mini-shops in Toys “R” Us is that it doesn’t require American Girl to make a significant capital expenditure like they would to open a new standalone store.

I predict that we will see more girls with American Girl dolls in late December!

arnold maggi
Guest
6 years 8 months ago

American Girl will certainly get a sales jump at Toys “R” Us, but is it worth it in the long run? I have been at both Toys “R” Us and FAO Schwarz in executive capacities and while at FAO tried to get the company to set up a Boutique for American Girl Dolls in our 5th Ave Store; this was back in 1974 and they would not do it. They thought they would lose the brand appeal and get lost in the store.

Now they want to set up in Toys “R” Us??? They will kill the “Brand.” Toys “R” Us is a discount store and not the place for $100 dolls. I know that sales were down, but this is not the place this “Brand” belongs. eventually, it will wind up being discounted.

Goodbye “American Girl.”

Jillian Fisher
Guest
6 years 8 months ago

You must be mistaken on the year. American Girl wasn’t around in 1974. They started in 1986. And the company has changed hands several times since the founder sold Pleasant Company (the original name) to Mattel in 1998. Sadly, that is also when the brand began declining in the eyes of longtime fans. Sometimes slowly, sometimes drastically, and occasional rebounds gave hope that AG would return to the “good old days.” But right now it seems to be utterly confused.

Jillian Fisher
Guest
6 years 8 months ago
I have been a devoted fan of American Girl since I was six years old, back in 1991 when my grandmother sent me a housewarming gift of a book, Meet Kirsten. Kirsten was a Swedish girl who immigrates to America in the 1850s. Her family joins more family in Minnesota, but not before experiencing real hardships along the journey. That book contained a card in the back showing the American Girls Collection dolls and books, and inviting me to send for a catalogue. Naturally, I did. And from the moment that first catalogue arrived, my life changed. Seriously, the brand was that magical. And this was back around the time they only offered historical dolls and had only just expanded to four characters with the fairly recent addition of Felicity, their Colonial girl. That catalogue (they were always spelled that way) was gorgeous and enchanting. From the cover it set the tone of a rare, precious, magical experience – time travel. Each cover featured a girl and a doll reading a book. That was me,… Read more »
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Braintrust
"Perhaps they've already strayed too far from the exclusivity and luxury experience that made them so successful"
"Obviously, the recent sales declines are prompting American Girl to seek other distribution options."
"American Girl has a good experience, but what if, increasingly, it is the wrong one?"

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