Toys“R”Us is Gone, Yet the Toy Industry Demonstrates its Resilience
August 7, 2018 | In the midst of several months of disruption, financial risk, and outright tumult for the U.S. toy industry, The NPD Group released figures yesterday that documented U.S. toy sales rose 7 percent in the first half of the year. That’s a welcoming statistic considering the challenges toy companies have faced, including the closing of Toys“R”Us U.S. locations, an evolving retail landscape, multichannel shopping, and shifting consumer preferences.
NPD’s findings also give a needed jolt to the naysayers who keep projecting doom and gloom for the toy industry. Media outlets seem reluctant to report on positive signs, instead choosing to describe the business of toys as “struggling to find a way forward” and lamenting that it’s supposedly hard for toy companies to capture the imagination of kids. But that couldn’t be further from the truth.
NPD’s sales report confirms that toy companies, retailers, and consumers sent a clear message that the sky is not falling in the toy industry. Yes, there is much work to do, time will be needed, and we still have the vital Q4 ahead. Toys purchased earlier in the year via liquidation appear to have been given at that time and not held for the holidays. Yet, with an active first-half movie season driving licensed properties, strong performance in youth electronics and dolls, and surging interest in dinosaur and unicorn toys, combined with retailers of all shapes, types, and sizes mobilizing to win market share that’s up for grabs, positive proof points go beyond just a recent flood of liquidated product. Again, reason for optimism for the upcoming holiday season.
Out of the 11 supercategories tracked by NPD, eight had positive sales in the first half of 2018, with four categories – Action Figures & Accessories, Dolls, Youth Electronics, and All Other Toys – posting double-digit growth. NPD noted that consumers continue to be hungry for collectibles as evidenced by the strong performance in smaller-priced items across categories. We’ve seen tons of unboxing and surprise-element toys this year that kids are clamoring for and will continue to do so throughout the holiday season. Toymakers are also delivering innovative robotics and tech toys that offer children engaging activities and educational value that’s fueling strong growth in Youth Electronics. And in the Action Figures & Accessories and Dolls categories, licensed toys remain a powerhouse reflective of the strong properties released so far in 2018, like Black Panther and Jurassic World: Fallen Kingdom.
The loss of Toys“R”Us, while tragic especially for tens of thousands of their employees and with lasting negative impacts on some of our member companies, is providing opportunity as savvy retailers mobilize to grab market share. Walmart, Target, Amazon, Party City, J.C. Penney, and Kohls are just a few examples of retailers and distribution channels expanding their toy selections or shifting into the toy space in time for the lucrative holiday selling season. Many specialty toy retailers are doing an excellent job claiming their space and extolling their many benefits to shoppers in the local markets they serve.
And we are seeing positive signs on the horizon for further recovery in 2019. As I write, manufacturers and retailers alike are gearing up for Fall Toy Preview this October in Dallas, where we have already experienced a 23 percent jump in retail companies registering for the fall marketplace. As you know, the show represents the most comprehensive gathering of brands with ready-to-preview lines for the following holiday season as well as those with the ability to do business for the upcoming Q4. The big jump in retailer interest and their diversity validates that the discovery and deal-making done in Dallas is crucial for their businesses.
To be sure, our industry is by no means out of the woods yet. Even with great first half results buoyed by all the attention in our space, there are challenges aplenty – from the recovery process that continues for manufacturers looking to recoup actual monetary losses or replace lost sales from Toys“R”Us’ U.S. stores, to the constant threat of tariffs on China imports, to risks from IP infringement and counterfeiting, to the quickening transformation of the retail landscape and buying habits. But as I see it, there are equally strong undercurrents of entrepreneurialism and positivity that should be encouraging to us all. Together we can continue to take on challenges and shape the toy industry to meet the wants, needs, and desires of the families and children we exist to serve.
Toymakers are a proven resilient group, retailers want to win, kids love toys and play, and adults love the kids in their lives. All this leaves me certain we will come out the other side of these “interesting times” stronger, nimbler, more responsive, and more able to weather the next challenge, while continually bringing great toy, play, and youth entertainment products to market. You have our commitment to do whatever it takes to help protect and promote the business of toys.
I wish everyone an enjoyable final few weeks of summer and let’s all be certain to grab for the brass ring in Q4!
All good wishes,
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