Three events focus attention each year on a key global products market – childrens’ toys, estimated at $32B (2020, no video games). The Hong Kong Toy Fair (January), Nuremberg Toy Fair (end of January), and New York Toy Fair (February). Even in the early 2000s 45% of global toy sales were in the US/NA market. Over the last 20 years Alien Invaders have taken over the sales of toys to consumers in the critical selling quarter. The focus of this release is on the American toy market.
Toy selling in America had increased in sophistication and national reach with the rise of TV advertising (started in 1955 advertising Mattel with the American Broadcasting Company on the Disney Mickey Mouse Club Show). In the 1960s this continued to TV cartoon shows (General Mills created Rocky and Bullwinkle). This continued in the 1980s with advertising by toy companies underwriting entire childrens’ TV shows. During this 20th Century era large national department store chains (like Sears, Penney’s, Montgomery Wards, SS Kresge, and Woolworths) dominated toy sales with prices that were fixed (couldn’t be discounted) and seasonal advertising with print, TV, and catalogs. The retail Category Killer and discounters killed old department stores. By the 1990s five retailers controlled most US toy sales: Toys’R’Us, WalMart, K-Mart, Target, KayBee. Major toy chains like FAO Schwarz could still drive market buzz and hot products. Then Alien Invaders killed the Category Killers. Walmart and Target shifted inventory and floor planning risks to manufacturers. Replenishment of hot SKUs made logistics critical.
In 2020 the largest toy manufacturers still had some classic best sellers. The US Top Selling Toy was the Mattel Barbie Dreamhouse (unloved by generations of many a parent who’ve had to assemble the present on a night before). The largest toy sellers: Amazon, WalMart, and Target. The key way to build demand: social media (Mattel says YouTube is a key focus, TikTok and other influencers also drive ad dollars). Toys’R’Us is a pop-up in 400 Macy’s, FAO Schwartz and Disney Stores are allied with Target. The classic retail business model was disrupted and large sellers bankrupted: Toys’R’Us, K-mart, KayBee.
What happened? An Alien Invasion!
1) Amazon inserted itself between consumers shopping for toys (and wanting firm delivery without traipsing to multiple outlets) and brick-and-mortar retail (intercepting store foot traffic and high profit sales)
2) “Exclusive deals” used by Toys’R’Us and other chains became more than 1000 “Amazon Exclusive” (Target exclusive on 1300 toys, WalMart exclusive more than 1000 too)
3) Catalog and satellite/TV shopping costs (linear media) were replaced by search engine/recommendations and price comparison shopping (non-linear)
4) “Couponing” and “loss leaders” became ineffective at point-of-sale compared to the immediate consumer perceptions of online “flash deals” and easy pay/free shipping with firm delivery
5) Store merchandising and replenishment logistics were attacked with fulfillment logistics (no one cares which Amazon warehouse toy ship from, and in some markets toy delivery can be 2-4 hours).
6) Direct pay for influencers and affiliates drives transactions to Amazon more efficiently than to brick-and-mortar fulfillment (WalMart and Target online toy fulfillment lags Amazon)
The Alien Invasion format succeeds: Capital (none of the ‘big three’ pay in advance for inventory), technology (marketplace shopping, non-linear media, direct connections to social media), expertise (logistics and economic business model).
Happy holidays!
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