by NATHAN RIGBY, vice president, One Click Retail; and DANNY SILVERMAN, CMO, Clavis Insight
On September 19, 2017, Toys “R” U.S. filed for Chapter 11 bankruptcy protection. Once the most recognizable toy seller in the country, it struggled in recent years as consumers increasingly prefer to shop online, and kids are more interested in touchscreen technologies and robotics than board games and action figures.
Enter Amazon. While Toys “R” Us racked up debt throughout last year, Amazon’s toy sales grew by 12 percent. The e-commerce giant has numerous advantages over its brick-and-mortar competitors. Today, Amazon’s Prime membership is at an all-time high, with free two-day and same-day shipping available to most Americans. When a retailer that sells everything—from toys to tablets to household staples—offers those perks, it’s no surprise that most consumers are choosing the one-stop-shop of Amazon when buying toys.
Research shows that 51 percent of Americans prefer to shop online, and 44 percent of online sales take place on Amazon.com—which suggests that Amazon is the preferred retailer of nearly one out of every four Americans. This trend helped toys become Amazon’s seventh biggest product group in 2017, generating an estimated $2.3 billion in sales.
While brick-and-mortar competitors such as Toys “R” Us and Walmart have their own e-commerce channels, one of the key advantages of Amazon is the infinite shelf of variations and niche items you are unlikely to find in most stores. To demonstrate this, Clavis Insight carried out an analysis of SKU availability late last year that looked at the daily local stock of both Amazon and Walmart for 20 of the season’s must-have toys and 20 of the hottest electronics across 24 U.S. cities.
During Black Friday week (November 23 to 29), Amazon achieved 89 percent availability in the electronics category and 92 percent availability in the toys category. Walmart’s performance was well below these marks with only a 65 percent availability rate for electronics and 66 percent for toys, and Amazon continued to outshine Walmart for the 40 products monitored well into December.
Millennial families was one of the biggest consumer trends of 2017: Every year, more people in Amazon’s core demographic are raising children—and buying a ton of stuff for them. The boom in the infant population helped infant/preschool to climb from the No. 3 to the No. 1 toy category on Amazon, just beating construction toys.
Another major trend is the ongoing popularity of robotic toys, a category that grew 32 percent year-over-year during 2017. Amazon’s top toy for the second year in a row was Cozmo, the intelligent robot for kids from San Francisco-based artificial intelligence start-up Anki. The runner-up in 2017 was another robotic toy, LEGO Mindstorms EV3, up from No. 4 in 2016 after having been the No. 2 toy back in 2015. The fact that this toy continued to be one of the top sellers for the past three years shows the ongoing demand for robotic toys, but also suggests that there may be an opportunity for new competition in the growing robotic toy space.
Cozmo, though, seems to have peaked.It was the best-selling toy of 2017 overall, but sales trailed off significantly before the Christmas season in favor of new releases. Nerf was the real leader of the holiday season, with two items—the N-Strike Elite Strongarm Blaster and the Lazer Tag Phoenix LTX Tagger 2-Pack—being Amazon’s bestselling toys during December. LEGO also performed well by introducing another robotic toy last year, LEGO Boost, which climbed to No. 4 during December—just behind Mindstorms in the No. 3 spot—showing how LEGO was able to beat Anki by keeping its product line fresh.
Rounding out Amazon’s top five toys— for both the holiday season and for 2017 overall—is the Barbie Dreamhouse, a classic toy that remains a major success even as kids are increasingly losing interest in “traditional” toys in favor of touchscreens and robotics. For this reason, this picture of Amazon’s toy sales is necessarily incomplete, as tablets—as well as games and software designed for tablets—are arguably the favorite toy of most kids.
This year, the key opportunities in the toy space are clear. In 2017, robotics accounted for less than 2 percent of Amazon’s toy sales, and yet the top two items overall were robotic toys from Anki and LEGO. With sales so concentrated on only two brands, the demand for new competition in this space is high. Games geared toward children for touchscreen devices are also in high demand. However, traditional toys are still doing well—the top five toys of the year include a Nerf blaster, a bouncer, and a dollhouse.
As Amazon continues to grow and dominate the retail space thanks to unmatched convenience and product selection, it is imperative that other toy retailers embrace and emphasize their own strengths and advantages to remain competitive.
*January 1, 2017-December 31, 2017. Data refers to Amazon first-party sales only.
** December 1, 2017-December 31, 2017. Data refers to Amazon first-party sales only.
This article was originally published in the February 2018 issue of The Toy Book.