Where You’ll Buy Toys Now With Toys ‘R’ Us Gone

And, How New Tariffs Will Affect Toy Shoppers

Oct 24, 2018
Marketing

SMITH BRAIN TRUST – RIP, Toys “R” Us. The iconic (and recently liquidated) toy seller has left a giant toy-shaped void in the retail landscape ahead of the holiday season. And as shoppers begin to ponder where their go-to spot for toys will be this year, several retailers are looking to provide an answer. Marketing professor Jie Zhang says that already the competition is getting interesting.

“The toy war is going to take place more prominently in the physical world, rather than online, even though the most intense competition during the holiday shopping season is typically found online,” says Zhang, professor of marketing and the Harvey Sanders Fellow of Retail Management at the University of Maryland’s Robert H. Smith School of Business.

But that doesn’t mean Amazon won’t be among the top competitors. The goliath of e-commerce “is making aggressive moves,” Zhang says, as it seeks to fill Geoffrey the Giraffe’s shoes. 

It’s augmenting its online toy lists and offerings with an actual paper catalog to be delivered to shoppers’ doors and available at Whole Foods Markets, just like the ones Toys “R” Us used to publish. For decades, those catalogs were an American household staple, pored over and dogeared by kids making lists for their parents and writing letters to Santa Claus.

Target and Walmart also have long assembled smaller toy catalogs, and Zhang says they are likely to increase in size this year, as the three retail giants – Target, Walmart and Amazon tussle for toy-buyers’ affections.

“Walmart and Target are engaged in aggressive fighting for their share of the sales that would have gone to Toys R Us,” Zhang says. 

For its part, Target is hoping to lure shoppers offline and into stores, with plans to roll out a new experiential toy-shopping experience next month, just in time for the holiday shopping season. It’s adding 250,000 square feet of permanent toy space across more than 500 stores, and will further remodel 100 of its stores with a special emphasis on toy offerings, including electric ride-on vehicles, playhouses and outdoor play sets. The Minneapolis-based Target is also planning special play days and 25,000 “hours of joy” events across stores, where kids can sample the latest toys and meet fictional characters. 

It’s also adding to its shelves 2,500 new Target exclusive toys, significantly more than it has offered in past years.

Walmart is continuing to battle Amazon for market share online, even launching a virtual "toy lab" for kids to try out new toys and add them to their wish lists. But this holiday season, it is also taking the fight into its brick-and-mortar locations. It’s planning to host more than 2,000 “retail-tainment” events centered on toys this holiday season, designed to bring parents and kids into the stores.

“I think it’s a great idea for selling toys – to get kids into the stores, get them excited about the toys. The strategy just cannot be matched by any virtual, online, or mobile interface,” says Zhang.

A handful of other retailers – J.C. Penney, Kohl’s and Five Below to name a few – are also looking to increase their toy offerings this quarter, in an attempt to grab some of the Toys “R” Us market share. Party City, meanwhile, is planning to open 50 “Toy City” outlets, to be positioned alongside its Halloween pop-up stores. 

“These retailers have their own challenges, but the toy business may provide an opportunity during the holiday season,” Zhang says. 

“Of course, Walmart, Target and Amazon are likely to get the biggest share.” 

How the trade war will affect toy shoppers

Although many of the toys Americans buy, from Hot Wheels cars to American Girl dolls, are made in China, shoppers should not expect to see higher prices this holiday season as a result of the ongoing trade war between the United States and China, Zhang says.

This year’s prices were buffered against the tariffs, she says, mostly because of timing. 

“Fortunately, for the holiday season retailers usually plan their assortment about six months in advance because of global logistics,” she says. “By this time of the year, holiday inventory for most retailers would have already arrived and would likely already be in the distribution centers inside this country.”

Consumers can expect to see the impact of tariffs on retail prices in the first half of next year, she says. Already, Walmart and some other firms have warned consumers and shareholders that prices are likely to rise somewhat.

“What’s unknown, right now, is the exact list of consumer products that will be subject to the tariffs and how much of a price difference the tariffs will make,” she says.

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About the Expert(s)

Jie Zhang

Jie Zhang is a Professor of Marketing and the Harvey Sanders Fellow of Retail Management at the Robert H. Smith School of Business at the University of Maryland. She received her Ph.D. in marketing from the Kellogg School of Management at NorthwesternUniversity. She was a faculty member at the Ross School of Business at the University of Michigan prior to joining the Smith School. Her general research interest is to apply advanced econometric and statistical models to study consumer purchase behaviors and retail strategies.

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