Local toy stores could see 'best year yet' after Toys R Us collapse

Dive Brief:

Many, including shoppers and several retail industry experts, have lamented the collapse of Toys R Us, but the independent toy retailer members of the American Specialty Toy Retailing Association on Friday said that this year will be "the best year yet for neighborhood toy stores nationwide."
The group touted the selection, customer experience and community connection found in the 3,500 neighborhood toy stores across North America, and said the iconic retailer's end would lead to as much as a 20% increase in revenues for local retailers in 2018.
But toy makers are taking a hit with the important Toys R Us channel gone. Hasbro on Monday reported that first quarter 2018 revenues fell 16% to $716.3 million due to the liquidation of Toys R Us and retail inventory overhang, primarily in Europe. Hasbro shares slid on the news, as did shares of toy manufacturer Mattel, which reports later this week.

Dive Insight:

The local toy retailers represented by Astra last week dismissed the efforts by mass merchants to capitalize on the Toys R Us decline. But the collapse is likely to increase the market power of Target, Walmart, Amazon and other massive retailers that don't rely on toy sales year round and can afford to position toys as loss leaders during the holiday shopping season to drive traffic. Global investment banking firm Jeffries ahead of the holiday season last year noted that Amazon was poised to benefit from the now-bankrupt toy retailer's struggles.

"While big-box stores like Walmart and Target will attempt to take advantage of the vacuum left by the venerable toy giant that so many people remember fondly from childhood, Astra believes that the unparalleled experience of discovering new and unique toys and games in a friendly, hands-on setting will appeal to parents tired of wandering through warehouses or scrolling through websites in search of that perfect toy," the group said in a press release.

Astra President Kimberly Mosley said that the group believes that as many as half of all regular Toys R Us customers will likely visit a local toy retailer now. However, Amazon has reportedly been eyeing some Toys R Us locations, which could drive manufacturers there instead.

"We are working to put the near-term disruption from Toys R Us behind us," Hasbro CEO Brian Goldner said in a statement on Monday. "Our global retailers view this as an opportunity in a key consumer category and are partnering with Hasbro to develop growth plans for our brands. New Hasbro initiatives shipping in this quarter and beyond won't be caught up in the Toys R Us liquidation process. With the rapid shift to a converged retail environment, we accelerated plans we originally had spread throughout the year to transform our commercial organization on a more immediate basis."

Mass merchants and other large sellers arguably helped drive Toys R Us toward retail oblivion. The toy seller was outgunned on price by rivals during the holiday season, as it has been for several years now. It also made numerous operational bungles during the period, which along with competition, made for a disastrous fourth quarter sales decline that set the retailer's U.S. liquidation into motion.