Toys “R” Us controlled 13.6 percent of the U.S. toy market in 2016 – $1.7 billion in sales – before being liquidated and shuttered by their hedge fund owners.

It was anticipated that, in 2018, Walmart, Target and other major retailers would pick up the slack left by their absence.  Toy makers Hasbro and Mattel took hope from the fact that consumers who used to turn to the specialty retailer had switched to buying online, and, as a consequence, the toy makers were expecting that other retailers would be able to absorb about 90% of the inventory that they previously sent to Toys “R” Us.  However, that notion was perhaps optimistic – toy sales in the first two weeks of November were down by 15% at brick-and-mortar retailers.  And the week that followed (Thanksgiving week) saw sales still down by about 5%.  As we’ve discussed previously in these posts,  Toys “R” Us, because they sold and stocked a large supply of toys year-round, could carry inventories past the Christmas season, that regular retailers cannot.  Thus, Walmart and other retailers have been discriminating in their selection of toys this year, preferring to sell out of toys by the end of the season if at all possible.  This change will be difficult for toy makers to absorb, as most were planning on a big season in the fourth quarter.  It’s still  possible that there will be some relief from the switch to online sales – toy sales were up by double-digits online in November.  There’s a big difference, however, between shopping for toys online and shopping in stores with the array of toys on the shelves, in front of the shoppers.  And, there are other, personal elements that add to increased toy sales when done in person, in a store.  It’s rare that shoppers are alone when they’re shopping for toys – if they’re with children or other family members, there will be the “attachment phenomenon” that comes into play – whereby, those assisting with the selection will become “attached” to additional toys while looking for a specific toy.  Thus, many more toys than originally anticipated tend to find their way into the shopper’s basket – and the shopper willingly complies with the additional selections – “It’s Christmas, after all – and that only comes once a year.”  Of the two major toy makers, – Hasbro and Mattel – Hasbro is in a better position to roll with the punches this toy season, while the industry continues with its “shake-out” in the aftermath of the Toys “R” Us demise. Hasbro has been better managed and has thus been able to invest in growth; Mattel has undergone changes in leadership and has been saddled with debt.  Hasbro also owns the rights to a number of Disney franchises.  For all concerned – and for children everywhere – we wish a good 2018 Christmas to U.S.  toy makers.

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