The Toys R Us liquidation won’t be a breeze for the toy industry

When we were kids, we would drag our parents to the local mall toy store, get our hands on the latest action figure, game, or other must-have toy, and pester them until they bought it for us. – just like the toy makers wanted.

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Now, with the announcement that Toys R Us plans to liquidate and close all 735 stores in the United States, the sector’s last dedicated retail footprint will disappear, leaving manufacturers searching for new ways to capture attention. young people – and their parents’ money. .

“From an experiential perspective, Toys R Us is truly the only showcase for toymakers,” said Marc Rosenberg, entrepreneur and toy marketing manager. “The best way to sell a toy to a child is to let them try it. You can’t do much online. If you don’t have that touchpoint, you’re really missing out on a selling opportunity.

Marketing professionals predicted that toymakers would turn more to experiential marketing tactics such as event sponsorships, pop-up stores and roadshows to get toys into children’s hands, as well as more online content like “unboxing” videos.

“Kids always want to ‘discover’ things,” said Robert Passikoff, founder and president of consulting firm Brand Keys. “Store setups are very engaging, but given the world of social media…there are other ways to expose what’s out there and toymakers are going to have to be a lot smarter in terms of outreach.”

In addition to marketing, the liquidation will create pricing, distribution and technology challenges for toy companies.

Analysts say it will be a headache for toy industry heavyweights like Hasbro and Mattel in the short term as Toys R Us winds down its U.S. retail operations, which includes shopping in its top 200 stores in hopes of keeping them open.

“I think there’s some short-term disruption – it’s more of a result of Toys R Us selling off inventory and obviously they’re going to cut prices,” said Eric Handler, media and market analyst. entertainment at MKM Partners.

“It’s a transition year, I think it’s because it’s unclear where you have to distribute and what the allocations should be,” said Jim Silver, CEO of toy review site TTPM.com. .

While a large majority of toys are still sold in physical stores, online competition looms large. “E-commerce exposure has increased in recent years,” said Jaime Katz, equity analyst at Morningstar.

A growing reliance on Amazon could threaten toymakers’ profits, she said, and could prompt brands to invest more in their own online channels. “You wonder if they’re going to make a bit of an effort to sell on their own platforms…to make sure prices stay optimal to protect the brand.”

Ultimately, analysts expect Toys R Us’ exit from the market to help larger toymakers gain market share. For small manufacturers, who are faced with crowding out big box or department stores, it’s a different story.

“Toys R Us was much more important to small businesses that couldn’t fit on the shelves of Target or Walmart,” Katz said.

A silver lining could be that independent retailers could gain a foothold in the market.

In addition to big box stores, Toys R Us’ market share would likely be taken up by a combination of department stores and less conventional types of retailers such as pharmacies, party supplies and craft stores.

If there’s a silver lining, it’s the suggestion that these retail maneuvers offer an opening for independent retailers to regain a foothold in the market – a prospect that could also be a lifeline for smaller manufacturers.

“There’s all this thinking in the toy industry that Toys R Us killed the moms and pops, Amazon killed Toys R Us, and it’s kind of funny…for the moms and pops and some independents now, there is definitely a possibility to come back,” Rosenberg said.

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