Toy Manufacturers Choose Sides

Nov 11, 2004

By George Anderson

Toy manufacturers are rallying to Toys ‘R’ Us’ side this holiday season with exclusive deals and advertising support because, as one anonymous company executive told The Wall Street Journal, “Toys ‘R’ Us is the industry’s lifeblood. As Toys ‘R’ Us goes, so do we.”

The retailer’s parent company announced back in the summer it would explore a possible sale of the chain that has lost its position as the top toy seller in the country to Wal-Mart. Bidding for the company from interested parties is expected to begin this month, according to the WSJ report.

Manufacturers including Mattel and Hasbro have come to the aid of Toys ‘R’ Us for the holiday season with exclusive deals, such as Mattel’s Hokey-Pokey Elmo. About 25 percent of the items in Toys ‘R’ Us’ inventory this holiday season will be products that cannot be found in Wal-Mart or any other toy retailer.

The manufacturers are also throwing advertising dollars behind Toys ‘R’ Us with 21 commercials featuring toys exclusively being sold in the chain’s stores.

Moderator’s Comment: What are your thoughts on the exclusive product and marketing deals that toy manufacturers have
made with Toys ‘R’ Us for the holiday season? Do you think manufacturers in other product categories are likely to work out similar arrangements with former market leaders who
have given up the top spot to Wal-Mart?

According to the WSJ report, Toys ‘R’ Us approached as many as 30 manufacturers asking for exclusive toy deals and advertising support. “The magnitude
of the response underscores how uneasy toy manufacturers are about the industry’s future, with a further-weakened Toys ‘R’ Us and an even more powerful Wal-Mart. In such a scenario,
manufacturers — and their profit margins — would be even more vulnerable to the demands of Wal-Mart, which dominates mass merchandising and is notorious among suppliers for
driving down prices.”

George Anderson – Moderator

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