Target Disappoints in 2019; Did the Toys R Us Chickens Come Home to Roost

AdobeStock_156035441

It is the absence of the sheer variety of toys that Toys R Us offered and now missing from the marketplace that is going to be a challenge for the toy industry for some time to come.

……

CNBC reporter Sarah Whitten contacted me this week about an article she was writing on Target's disappointing sales this Christmas. Her report, "The real warning in Target’s holiday sales: Toys are in trouble," notes that Target pointed to weak toy sales as one of the reasons they disappointed shareholders this holiday season (shares of Target stock fell 7% on the news).

In giving her my input, I expressed my opinion that the loss of Toys R Us had a lot to do with not just Target's weak performance but the entire toy industry this past holiday season.

Here is how I put it in her article: “The chickens are coming home to roost from the Toys R Us bankruptcy,” said Richard Gottlieb, CEO of Global Toy Experts. “You cannot eliminate that many toys from the marketplace (remember TRU had vastly more items) without it having an impact. A great loss of incremental and impulse sales.”

To elaborate, Toys R Us provided a vastly larger variety of toys than all the other outlets combined. They were the only major player which was all about toys, and as a result, they carried more items and more assortments. There was, therefore, a greater variety in the marketplace. As a result,  there was more to buy. Not only that, a trip to Toys R Us resulted in more impulse toy purchases. After all, its a toy store, so adults and kids see a lot more items designed to catch their eye.

Yes, the Internet continues to gobble up sales from the bricks and mortar stores, there was no hot toy this year, and fears of tariffs and the specter of impeachment dampened holiday spirits. But in my opinion, it is the absence of the sheer variety of toys that Toys R Us offered and now missing from the marketplace that is going to be a challenge for the toy industry for some time to come.

 

4 thoughts

  1. Only have anecdotal evidence, but Target seemed to have trouble stocking what new toys there were for lines such as Marvel, Star Wars, and Jurassic World. Hearing from fellow fans and collectors, and visiting multiple stores in Central New York, Target seems to be bogged down with 1-2 year old toys for some of the brands I mentioned. After an initial push for Star Wars on October 4th, stores never stocked fresh product in December leading to the holiday. I walked out of Target w/ money in hand and ordered online but it wouldn’t have been my first choice.

  2. Perhaps consumers were simply bored with the manufacturers’ move to low price point, low content-rich toys. It was a year without a breakout hit toy to drive consumers to stores. Manufacturers may need to put their creative hats on and come up with some compelling products.

  3. …But let’s acknowledge that TRU was also a museum of stiffs and write-offs and was run somewhat on a Ponzi scheme of charging marketing dollars on the way in and markdowns on the way out. There was a massive amount of inefficiency in the TRU model which ultimately imploded on them. It’s tempting to get nostalgic about TRU but for the last decade of its life at least, it was a bad business.
    And what that covered up for were inefficiencies in the toy market – too many SKUs, too much tooling, too many underperforming brands and licenses, too much inventory. All of this has been exposed.
    I do worry for the toy industry with this news out of Target. There are so many meta trends impacting the toy industry and almost all of them are headwinds. It’s no surprise to me that these companies like Funko, Just Play and Jaswares are benefitting from these shifts. The days of these big bloated corporate toy companies based around retail distribution and big load in quantities are over. You really have to run lean to be able to weather the storms.

Leave a Reply to Michael Kohner Cancel reply