Toy City pop-ups look to fill the gap left by Toys ‘R’ Us

Image: Party City
Jun 28, 2018

Party City is looking to be one of the retailers that benefits from the demise of Toys “R” Us. The party goods retailer announced a pilot to open 50 temporary Toy City stores “alongside” its Halloween City pop-ups across the country.

The retailer expects the Toy City pop-ups to benefit from their physical connection with the Halloween City sites. Both pop-ups will open in early September.

“Party City is the unmatched leader when it comes to relevant product offerings for everyday occasions and seasonal celebrations, and we’re always looking for opportunities to enhance these assortments for our customers,” said James Harrison, CEO of Party City. “The creation of a Toy City concept to complement our temporary seasonal retail strategy is a logical extension of our brand; one that will allow us to leverage our existing pop-up store capabilities and capitalize on the category whitespace that has recently been created.”

The retailer also plans to expand its assortment of toys online in order to reinforce that experience for its shoppers.

“As the leading omni-channel retailer in the category, there are many benefits to this pop-up store expansion strategy,” said Mr. Harrison. “We’re excited to increase our toy assortments while still remaining focused on our core seasonal offerings.”

A CNBC article points out that the pop-up strategy being employed by Party City is the very same one Toys “R” Us used after KB Toys folded in 2009. The once giant toy retailer opened 90 Express stores during the 2009 holiday season, many in former KB locations, and followed up with around 600 of the pop-ups for Christmas 2010.

The architect of Toys “R” Us’ Express strategy, former CEO Jerry Storch, is reported to be working with investors to acquire the intellectual property of the chain with plans to open several hundred stores that would combine toys and baby brands under a single roof.

DISCUSSION QUESTIONS: Do you agree that expanding into toys is a logical extension for the Party City brand? Will the Toy City pop-ups and expanded selection of toys online prove successful for Party City?

Please practice The RetailWire Golden Rule when submitting your comments.
"Party City has expertise with the pop-up concept at scale so operationally, they will pull this off without a hitch."
"The coming holiday season will look more like a war zone for the toy business ... everyone fighting for dollars left by the exit of Toys "R" Us."
"The toy retail market looks like it’s going to assume a completely different shape than before."

Join the Discussion!

23 Comments on "Toy City pop-ups look to fill the gap left by Toys ‘R’ Us"

Sort by:   newest | oldest | most voted
Mark Ryski

This is an opportunistic play by Party City, which has a proven record of deploying successful pop-up stores. As has been discussed in previous posts, the toy category is a challenging one with Amazon and Walmart leading the way. The demise of Toys “R” Us does leave a gap in the market and so it’s not surprising that clever, nimble players like Party City are trying to fill the gap. I think this is an interesting play for Party City, but it won’t change the general dynamics of the toy category.

Phil Masiello

This is a very smart move on the part of Party City. It makes good brand sense and I am surprised they had not executed on this sooner.

Pop-up stores are a fast and low-cost way for Party City to test the validity of the concept. The online strategy is very sound. With the traffic their website is already generating, adding this category will surely add incremental revenue and profit.

Bob Amster

Definitely a good move. There is enough synergy between the two product categories to make this work. There is also a seasonal aspect to both categories. Furthermore, if a consumer is planning an event like a birthday, the consumer may be enticed to also buy toys for the person whose birthday is being celebrated at the same time in the same store. The concept has some runway.

Tom Dougherty

It all depends on how Party City defines success. They are pretty much alone in the party supply business. And Halloween pop-up stores are mainstream for that holiday. But toys? It gives them something else to sell but I doubt if toy pop-ups can ever become the destination that Halloween ones are.

Toys: not the same brand of beer as PARTY.

I believe there are just a couple of choices in retail going forward. A quarter of an inch deep and a million miles wide. Or a million miles deep and a quarter of an inch wide. This does not fit into either scenario.

Chris Petersen, PhD.

Toy City pop-ups seems to be a good fit with the Party City brand. Party City has the background, history and expertise in executing seasonal pop-ups. The toy category is highly seasonal, so it seems to be a good fit. The question for Party City is whether they can leverage Toy City into some kind of omnichannel relationship that continues after the holidays.

However, the trends are clear. Customers are increasingly buying online. Amazon and Walmart dominate the toy category. If parents are buying toys for the holiday, speed is one thing, returns are another. Toy City pop-ups must address returns after the pop-up is closed.

The advantage of pop-ups is the low entry cost, and everything is measurable without sinking a ton of capital in fixed costs.

Charles Dimov

Backing up Mark’s comment — YES. It is a smart opportunistic move to fill the gap in the market fast, using the comparatively inexpensive pop-up strategy. Using this in conjunction with an omnichannel play will hit the mark. Customers can buy online and use the pop-up locations as pickup points. Party City’s market is closely associated with the toy space, so it is a natural fit. The two should complement each other.

Art Suriano

Party City is brilliant in developing this strategy. They have had great success through the years with Halloween City. Opening Toy City pop-up stores for a few months is wise because there is no long-term commitment and it gives them a chance to test out strategies and concepts before making any decisions on future steps. Should they prove fruitful, and I believe they will be, Party City can then decide on opening year-round stores or, when possible, expanding existing Party City stores with more toy product.

Selling toys online is also a smart move because again there is little investment should things not work out but most likely I would think it would. So whether it’s selling toys via online, pop-ups, year-round stores or more toy product in existing Party City locations, it’s going to be a win-win, and I see nothing but success.

Cathy Hotka

It’s a great move, and why not? Party City will do best to carry a curated selection that works, rather than take on the giants by carrying everything.

Joan Treistman

Offering an option for toys next to a pop-up Halloween store makes good sense because of the season. Right? Christmas comes earlier and earlier. Brick-and-mortar stores for toys rely on having the right toys at the right time. The selection and ordering process for retailers and marketers used to be tricky business. I don’t think this is a slam dunk for Party City in terms of revenue. But as long as they keep their costs low the first-year experiment will show them whether it’s worth their while to continue.

Paula Rosenblum

I wonder if I have too much history and knowledge of the company to answer this question. In any case, here goes: Party City only really became successful when it was bought by Amscan (even though they took it public under the Party City name). Before that, it was predominantly driven by its franchisees, because the party supply business may have good margins but the average ticket is so low that it’s a business that’s almost impossible to scale. With vertical integration those margins doubled, and it became a viable business. I believe they also opened a costume designer business to compete with Ruby’s who had a virtual monopoly on Halloween costumes.

Toys have a much lower opening margin, and can be very license-driven. That means it’s going to be hard for Party City to “verticalize” them.

Do I think it’s a logical extension of the brand? I’m not sure. Do I think they’ll make money at it? I don’t.

David Weinand

Party City has expertise with the pop-up concept at scale so operationally, they will pull this off without a hitch. The timing is good, as well, with a September opening. Their merchandise mix will be critical in order to attract those fickle kids but I think it is a very smart move that should deliver good results for this year and likely will into future years.

Joy Chen

Party City’s strategy to capture the demand left by Toys “R” Us is very opportunistic. The use of pop-ups will also bring in additional consumers due to the seasonal excitement. Although Party City’s pop-up strategy works in the short-term, the toy category still needs a fundamental business model change for this to be successful long term.

Gene Detroyer

Brilliant! I wish I would have thought of that. With the exception of toys licenses and toys related to movie releases, there is as much business done in toys in Q4 as there is in the balance of the year combined. So why even have a store selling toys in Q1 through Q3?

It isn’t even a matter of being opportunistic. It just plain makes sense.

Jeff Sward

YES — absolutely. At a minimum it’s worth trying. I’m sure there are multiple ways to test different content that will work. “Party plus toys” is an eminently logical combination. It can save the party customer from additional shopping. The opportunity and ability to save the customer TIME and aggravation is ALWAYS welcome. And if they can’t get certain licensed product, so what? Toys is a big universe. You could say Sharper Image was a toy store.

Rich Kizer

I think the coming holiday season will look more like a war zone for the toy business, with everyone fighting for the dollars left by the exit of Toys “R” Us. I do agree with Art; I know that Party City is brilliant at what they do. However, entering the toy market with pop-ups will be like entering a market of sharks where everyone (big and small) will be fighting for customer attention and market share. That being said, inventories must be complete and definitely convince customers at first glance that these pop-ups are undoubtedly “in business” as compared to all other toy sellers who will be going all-in to own the business. Fickle customers can make quick footprints!

Neil Saunders

As a pop-up concept, this will likely work well. Party City has the expertise and skills to make this work and by capitalizing on periods of key demand it can maximize sales and profits from the stores.

This kind of more opportunistic approach to retail will make it more difficult to revive Toys “R” Us as a permanent retail business.

Carlos Arambula

I understand Party City expanding into additional offerings with a business model that works for them, but I question the move into the space of an outdated concept abandoned by Toys “R” Us.

Ricardo Belmar
Ricardo Belmar
Retail Transformation Thought Leader, Advisor, & Strategist
4 years 6 days ago

Given Party City’s experienced track record with pop-ups, this is a clever move for them to try and leverage the immediate gap left by TRU ahead of the next holiday shopping season. This is smart on their part, particularly with the online element included, and should produce good results from them. I would not be surprised to see them make this a regular occurrence with their Halloween pop-ups each year if no other brands step in to fill the void left by TRU. That said, I expect we’ll see Walmart, Amazon, and Target be quite aggressive this year with the toy category now that they have a clearer competitive field in front of them.

Peter Charness

There is still a market for people who want to browse the aisles, and pick out toys in person. It’s not all online. I think if the assortment is decent enough, (and maybe narrow enough to keep margins high enough) they will do well. Maybe the department stores will get back into the 10 weeks of toys section of the store, replacing seasonal?

Steve Montgomery

Opportunity knocked and Party City answered the door. Is the pop up approach a replacement to Toys “R” Us? No, but it should allow Party City to gauge the size of the price. Longer term, the success of this approach will be determined in part based on whether Mr. Storch can resurrect TRU and if so, on what scale.

Roy White

This is as much about the changing nature of retail as it is about filling the retail toy vacuum. Not only are traditional retailers, such as Walmart and Target (plus a start-up with toys and baby products under one roof) seeking to move into the space left vacant by the demise of Toys “R” Us, but now a different kind of operation is entering this arena. Party City not only operates with pop-ups, it’s also a vertically integrated manufacturer, distributor, franchiser and retailer. It has over 900 units globally. It achieved nearly $2.4 billion in sales last year, generated net profits equal to 9% of sales and its retail business operates on 44% gross margins. In the first quarter of this year, sales grew 7 percent and profits 14 percent.

The toy retail market looks like it’s going to assume a completely different shape than before.

Kenneth Leung

Would be interesting to see what type of merchandise they stock in these pop-ups. They know how to do pop-ups quickly and profitably with their party supply products which takes a lot of display space but cheap to store and transport. Toys have a different margin and shelf life. I am sure there will be decent traffic, but purchases will be drive by their merchandising.

Kai Clarke

This is a play by Toy City that will have limited appeal, since it doesn’t solve the true issues behind the demise of Toys “R” Us. This solution doesn’t address the ecommerce strengths that consumers are expecting (and the free freight, unlimited returns and guaranteed satisfaction) with today’s online or online/onground models.

Toy City is going to see some increase in purchasing since they are expanding their offering, but they are not expanding their online presence, nor addressing the keys that make a successful online model successful in the retail toy market. Until this is done, I see this as a simple band-aid with limited rewards for Toy City.

"Party City has expertise with the pop-up concept at scale so operationally, they will pull this off without a hitch."
"The coming holiday season will look more like a war zone for the toy business ... everyone fighting for dollars left by the exit of Toys "R" Us."
"The toy retail market looks like it’s going to assume a completely different shape than before."

Take Our Instant Poll

Do you agree that expanding into toys is a logical extension for the Party City brand?

View Results

Loading ... Loading ...