Last year, a buzzy product in the STEM space hit retailers across the U.S. with a $34.95 MSRP. By most accounts, the product was fairly priced and offered a solid value. Then came a surprise price drop on Amazon to $16.99 in November, a move immediately matched by Walmart and Target. For specialty retailers that viewed this as a “key driver” for the holiday season, the impact hit hard. With a cost near $20, they could match the price and sell it at a loss, or risk losing additional sales due to growing consumer perception that independent toy stores are overpriced.
That item is back to $28.99 at mass retail at press time, but some damage may have already been done. While the mass retailers didn’t respond to a request for comment, The Toy Book spoke to specialty retailers and manufacturers for insights into what’s become one of the most contentious pricing environments since the “category killer” era.
A ROUGH HOLIDAY SEASON
“I rarely look to call out extremely low pricing in toys and games as this is a function of today’s times and our industry,” explains Rick Derr, owner of Learning Express Toys & Gifts in Lake Zurich, Illinois, and President of the Learning Express Franchise Counsel. “I do, however, wonder why a highly visible and quality toy is priced so low that it stains the image of the item. This, to me, hurts the image of toys in general, when manufacturers have developed very high-quality and value-driven toys.”
At Hollywood Heroes, a specialty retailer in Westwood, New Jersey, owner Jordan Hembrough says that profit margins sank last year amid the most aggressive pricing he’s encountered in more than 30 years in the business.
“We saw many customers checking their phones and comparing prices on different websites. At that point, it just becomes an issue of ‘Who has the lowest price?’ which is ultimately unsustainable in the long run,” he explains.
Basic Fun! CEO Jay Foreman agrees “the battle here is between the retailers and the smartphone or computer, where shoppers have full transparency and the best pricing in real-time. That’s the battle, and I’m afraid it will be hard for specialty retailers to win,” he says. “The best chance is if they have an exclusive version of the product that is only sold in specialty stores. You can’t win the battle to sell a Barbie that’s at mass retailers in a specialty store. You must have a special version of Barbie that makes you unique. Same with Care Bears or Squishmallows.”
FIXING THE PRODUCT MIX
“Not every SKU belongs everywhere — channel management is essential,” explains Gwen Ottenberg, owner of Imagine That Toys in Wichita, Kansas. “Manufacturers must ensure their internal sales teams understand how products are positioned in mass retail and convey that information to make informed decisions [at specialty].”
According to Omer Dekel, CEO at PMI Kids’ World, “strict criteria for out-of-aisle launches” is leading to requests for early markdown dollars from retailers when that may not be necessary.
WORKING TOGETHER TO FIND CREATIVE SOLUTIONS
Derr points to early launches at specialty as one way to level the playing field, citing success with Melissa & Doug and Sky Castle Toys last year. For major suppliers dealing with retailers across all sizes and channels, the task is bigger, but there is hope in sight.
“The evolving retail landscape presents real challenges, which we take seriously,” says Cynthia Williams, CEO at Funko. “Pricing volatility, deep discounting, and accelerated clearance cycles create complexity for retailers and manufacturers. To address this, we’re working more closely than ever with our manufacturing and retail partners to develop planning models that balance supply and demand effectively. Strategic inventory forecasting helps minimize markdowns, while exclusive offerings for specialty retailers create differentiation in the market. Maintaining a balanced channel strategy — ensuring specialty retailers have access to unique SKUs or early releases — helps mitigate pricing conflicts and improves the premium quality for customer value. Ultimately, a healthier retail ecosystem benefits everyone, and we’re committed to solutions that drive long-term success for all our partners.”
A version of this feature was originally published in the 2025 edition of The BIG Toy Book. Click here to read the full issue! Want to receive The Toy Book in print? Click here for subscription options!
