The toy market is not a lot of fun for UK retailers

This week’s sale of the Early Learning Center by Maternal care because a fraction of what he paid over a decade ago shows that recent trading in the UK toy market has been anything but child’s play.

The industry has suffered several big failures – first Woolworths in 2009, then Toys R Us, which took office a year ago. Competitors, from supermarkets to Amazon, have crammed into the market, while sales of traditional wooden oars and games have increasingly been replaced by iPads.

Even Hamleys, the world’s most famous toy store, suffered. Trade has been weak in its last fiscal year and in recent months it has parted ways with its CFO and CEO.

Mothercare CEO Mark Newton-Jones said the company could no longer justify the capital expenditure and management effort required to develop own-brand toys that accounted for 15% of sales in a market overrun with many new entrants. funded.

“The supermarkets all started selling more toys and they were very price aggressive,” he said. In the aftermath of the financial crisis, “they used toys to increase attendance.” On top of that, Amazon was content to sell at much lower margins than traditional toy retailers. Then the likes of B&M, The Range and Home Bargains have moved in.

Chain stores and independent businesses have suffered most of the competitive pressure, as they have in industries such as books and entertainment. According to the Local Data Company, around a quarter of the UK’s childcare and toy stores – nearly 500 stores – have closed since 2012. Traditional toy makers have also suffered: last month, the maker of Play-Doh Hasbro complained about a “very disruptive year”. as he reported the Christmas trading under forecast.

Mothercare, a baby clothing retailer that bought ELC for £ 85million in 2007, could easily have bowed to the pressure itself without a drastic refinancing last year, which resulted in nearly half of its stores.

Gary Grant, who runs private toy chain The Entertainer, which bought ELC for £ 13.5million, is not disheartened by the upheaval.

“We believe in the shopping street,” Grant told the Financial Times. “We had an exceptional year last year, opening 16 new stores. We do for toys what Waterstones did for books.

The Entertainer has almost quadrupled its number of stores in the UK since the Woolworths collapse in 2009, to 163.

Mr Grant plans other openings, including the eventual return of stand-alone Early Learning Center stores, which sell hundreds of children’s toys, from plastic sandboxes to wooden buses.

There have been three relative winners from the recent turmoil. Argos, now owned by J Sainsbury, has become the UK toy market leader. Smyths, the private Irish toy retailer, has moved into some of the stores vacated by the Toys R Us bankruptcy and now has more than 100 outlets outside of town. “They stepped in when Toys R Us hadn’t invested. Their stores were much better and so was their web platform, ”said Newton-Jones.

Smyths, still owned by the four County Mayo brothers who founded it 30 years ago, declined to comment. Its annual income in the UK is around £ 500million.

Meanwhile, The Entertainer, founded by Mr Grant in 1981, operates a franchise business in the Middle East as well as its stores in the UK and has a turnover of £ 200million. Reflecting the religious beliefs of its founder, it donates a tenth of its profits to charity and its stores do not open on Sundays. Its website represents about a fifth of the group’s sales.

The withdrawal of weaker players from the market has not changed some of the other characteristics of the toy industry. It is the most seasonal niche in retail. “We achieve a quarter of our annual sales in just four weeks,” Mr. Grant said. A bad Christmas – or a weak Black Friday – is a big deal.

Surprisingly weak toy sales in Argos were a major contributor to the parent company’s 2.3% drop in non-food sales J Sainsbury during the holiday season.

He’s also prone to fads, ranging from the latest Disney movie release to lightning bolts like 2014’s loom group craze or last year’s big hit LOL Surprise – little dolls wrapped in looms. several layers of paper.

There have also been big changes in the way children play. “The world has changed and the way people play has changed,” said Newton-Jones. As the cost of technology has fallen, gadgets such as iPads have become more accessible, even for the youngest. According to Euromonitor, the video game market is now worth more than the traditional toys and games sector and is expected to grow at a faster rate.

But Mr Grant said that for young children in particular, play still has a vital role. “This is how children learn and develop,” he said.

He and Mothercare, who will continue to sell ELC toys for young children as part of a supply deal with The Entertainer, can take comfort in the fact that despite the encroachment of video, the second-largest toy brand individual in the UK is still Lego.

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