As we approach the official halfway point of the year, one point that most folks can agree on is that it’s been unusually quiet in the toy industry. While that means we’ve finally closed the doors on some looming issues from the past few years, quiet isn’t always a good thing: We need excitement!
At retail, a real lack of newness in the first half of 2023 has been a bit of a buzzkill, but if my Magic 8 Ball is correct, the outlook is good for the second half of the year. And, while results were mixed during the most recent earnings season, the back half outlook was echoed nearly unanimously by companies across the board.
Now, it’s hard to fathom a full rebound from double-digit declines to land flat for 2023, but we’ll see. As most of you know, in the toy business, anything can happen.
One welcome change is that mass retailers appear to have finally cleared out the excess inventory that bogged down stores, wiped out profits, and created a less-than-exciting shopping environment for consumers coming out of a challenging holiday season last year.
On their earnings calls this month, Walmart and Target expressed optimism that things are much better, while some of the off-price retailers (TJ Maxx, Ross, etc.) also noted a better inventory position.
Christina Hennington, Executive Vice President and Chief Growth Officer at Target specifically called out toys and collectibles as a growth category for summer, fueled by a return to blockbuster entertainment from Disney and Marvel, and the forthcoming Teenage Mutant Ninja Turtles: Mutant Mayhem from Paramount.
And while Macy’s doesn’t report its Q1 earnings until June 1, there were some positive vibes offered by Chairman and CEO Jeff Gennette when the company presented its Q4 and full-year 2022 earnings in March: Toys “R” Us at Macy’s more than doubled toy sales and attracted more than half a million new customers to the company’s stores last year.
Coincidentally, recent visits to Toys “R” Us at Macy’s locations have revealed that those store-within-a-store locations are actually offering some fresh toys right now that, in some cases, haven’t even surfaced at Walmart and Target yet.
What bodes well right now is that seasonal resets are in progress and the new toys are rolling in. Now it’s up to toymakers and retailers to connect with families to share the newness, because there are some great new products in the pipeline … and we’ve seen them.
Speaking of Retail…
I had the opportunity to attend the grand opening of Alex Toys’ new flagship “stage two” concept store in Schaumburg, Illinois outside of Chicago this month.
If you haven’t been following the rollout of Alex Toys, it’s time to start paying attention.
Alex Toys has the potential to become a new, national toy store chain in the U.S. akin to what the original Toys “R” Us used to be.
Developed by the teams behind Doug Putman’s growing retail empire, which includes Toys “R” Us Canada and FYE in addition to Babies “R” Us Canada, Sunrise Records, T.Kettle, hmv (UK), and the new rooms + spaces chain, Alex Toys’ first standalone concept is a 22,000-square-foot store that features a vast array of toys, collectibles, games, and adjacent products — including books, candy, and more — in proper departments geared toward reaching the entire family, from infants and toddlers to kids, tweens, teens, and kidults. They also have the big stuff that tends to be missing in toy stores right now, including bikes, outdoor gear, and playhouses.
The store was well-stocked, well-staffed, and, most importantly, my kids loved it.
This new era of “mass specialty” has the potential to co-exist peacefully with small, independent specialty toy stores while providing the “WOW!” factor that’s missing at the big-box stores.
Where the toy industry really needs to step up and support all of the non-mass retailers is with pricing. We’ve all known that this has been an issue for years, and frankly, I’m tired of seeing independent retailers and smaller chains get hammered on margin. On one hand, the industry says it wants to support independent retailers and emerging chains, but then it continues offering much more favorable pricing and terms to the big-box retailers. All channels are important, but it’s time to level the playing field on pricing. You cannot say that you support any retailer smaller than mass and then force them into a position of selling at higher prices. It creates an unfair consumer perception that “prices are high,” an issue that plagued the original Toys “R” Us in its later years.
Yes, there are many other ways to compete, but it’s beyond time to make pricing — and product availability — fair across the board.
There was once a time when multiple regional and national chains co-existed in the U.S., and I believe that it could happen again, but it won’t happen without real support from the industry that doesn’t just favor those with the deepest pockets by default.
