If you’re like many modern parents, you probably remember TRU from your own youth or from your older children’s childhoods; but you may not have actually stepped in one for years. For a busy mom or dad, the convenience of Amazon, particularly with thr added Prime benefits, simply proves far more alluring than braving traffic or checkout lines to visit your local brick and mortar toy retailer. So when you heard of Toys R Us’ recent bankruptcy (not their first, by the way – but possibly their last), you may have been thinking “So what? Who cares?”. But don’t say “good riddance” to TRU just yet; it’s potential closing might effect you, and the toy industry as a whole, more than you’d expect. Here’s why.
TRU’s bankruptcy certainly didn’t come as a surprise to anyone who’s been paying attention to the state of the toy biz. Sales have been declining for the better part of a decade, and the shuttering of the multilayer Times Square flagship store and high profile FAO Schwartz subsidiary in Manhattan didn’t do anything to help the chain’s image. The shifting retail landscape away from traditional brick and mortar locations towards online buying hit Toys R Us particularly hard; their adaptations in recent years, including a heralded American Girl “store within a store”, only slowed the bleed.
Our results for the quarter were disappointing. They not only reflect the broad competitive trends across retail, they demonstrate the continued challenges we face.
-Dave Brandon, Chairman and Chief Executive Officer, Toys“R”Us, Inc. in Q3’17 Financial Reports
As American families shifted their buying habits, they may have found themselves wondering why Toys R Us was necessary at all in an age where literally almost every product on the shelf there could be shipped to their door with two-day shipping. The real lots, however, lies in the discovery of toys. There are some obvious downfalls to not having a physical location to showcase the toys, including the simple fact that parents don’t have a place to bring their kids to pick out the toys they want. Nonetheless, easy Amazon returns and bountiful online reviews from other parents mitigated even this benefit. One of the lesser-contemplated advantages of having a Toys R Us in your neighborhood was that they were far more willing to take a chance on stocking a new, unproven product than say, a WalMart or Target.
Besides independent toy retailers, Toys R Us was one of the last physical stores willing to take this risk. The fear is that without this widespread and pervasive avenue for smaller vendors, the remaining options will be a bit bleak. WalMart and Target will continue to work primarily with the Hasbro and Mattel’s of the world; large companies with deep pockets for advertising and licensing, and the data to back it up. Smaller brands may find themselves with fewer ways of getting exposure en masse, and either fail to complete or get acquired by larger companies.
Amazon does help a lot of new and small toy manufacturers get their products in front of prospective customers quickly than the old brick and mortar method, which was far from easy (or cheap). New vendors would have to scratch together enough cash to attend an industry to trade show such as Toy Fair in New York City or Toy Fest West in Las Vegas to showcase their wares. Buyers from chain stores as well as independent toy stores walk these shows to find newest, latest and greatest toys to stock their shelves. It’s a fantastic opportunity for brands of all sizes to make new partnerships with retailers that will ultimately gain exposure for their toys; but, these shows can cost thousands of dollars simply to book a space. Add in the cost of travel, shipping products, constructing a booth, and adding electricity to it, and it only continues to add up.
Contrast that to the costs of throwing a product page up on Amazon: there are some nominal seller account setup fees and the cost of some good photography and copywriting, and you’re good to go. However, Amazon is far from a level playing field, and new brands might not find it the ideal platform for their products launches. The reality is that, while almost anyone can list on Amazon, it still takes deep pockets to get discovered on Amazon. Big brands pay big bucks to get the top “sponsored listing” posts, which means they get visibility on your searches even if it wasn’t exactly what you were looking for. And while it’s been cracked down on lately, the practice of buying paid reviews to boost organic search rankings within Amazon is alive and well. The end result is that if you’re a new brand trying to launch an innovative invention, you could still be banished to later pages of the search results if you don’t have the capital to back it up.
That’s not to say that big corporations like Mattel and Hasbro aren’t releasing innovative toys – because they are, and they spend millions on it every year. However, it’s also undeniable that much of their innovation came from the acquisition of smaller vendors. Or that, like WalMart and Target, these large toy companies are less likely to take a risk on the unknown. Or the simple fact that this consolidation will mean fewer small players and new entrants into the toy industry, which in turn means fewer perspectives shaping the evolution of play.
Further reading:
Toys ‘R’ Us Is Considering Closing All of Its U.S. Stores Amid Bankruptcy
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