The State of the Toy Industry in a Digital World


The toy industry has been in a state of flux ever since big box sweetheart Toys “R” Us announced its closing. Brands are finding challenges and opportunities with each shift. While brands attempt to navigate these new waters, the online toy industry keeps growing. According to a new report by Statistica, the toy and hobby industry generated more than $19 billion in online sales in 2018 in the United States alone. That’s a lot of toys. With figures like that, it’s a very exciting time for the toy world.

No more Toys “R” Us Kids

Up until recently, many toymakers relied heavily on their brick and mortar partners as their primary means of distribution, and didn’t invest as much in their own e-commerce platforms. Much of the heavy lifting was done by retail channels such as Toys “R” Us, Walmart, and Target.

When Toys “R” Us announced they would close all 735 of their stores by June of 2018, it created a watershed moment for the industry: brands were forced to embrace major trends in e-commerce and rethink their strategy. While brick and mortar is far from dead, e-commerce is making a significant impact on the industry.

“Historically, baby and toy brands have strategically focused their efforts on brick and mortar sales,” said Laura Martini, Category Leader at Netrush. “With the exit of Toys “R” Us and the increasing significance of e-commerce sales, brands are in need of a strategy that allows them to keep up with the ever-changing landscape and begin to focus more on their digital efforts.”

From Geoffrey to Jeff

While long-time customers mourn not being Toys “R” Us kids anymore, e-commerce retailers jumped at the opportunity to take a slice of a market once held firm by the big box chain. According to a report by Edge by Ascential (and to nobody’s surprise), Amazon absorbed much of this space, as 2018 toy sales on the platform increased at a rate of 30% over 2017 — faster than Amazon’s overall growth.

Many consumers are starting to turn to Amazon to buy toys for their children, which makes sense — it’s where they’re already purchasing diapers and household items. A Criteo survey of 1000 former Toys “R” Us customers found that a third of shoppers consider Amazon to be their “retailer of choice.” Insights like these should motivate brands to seriously consider selling on Amazon.

Finding the Right Partner

Toys “R” Us was not only a major distributor for brands — they were also an effective and unique partner for bringing new products to market. Many in the industry saw the retailer as an incubator to bring new ideas to consumers and test products to gauge interest and potential sales. With this relationship gone, brands are trying to find new models via other retailers to perform test launches.

“Big box stores aren’t yet willing to take the chance on new products or lines when they don’t already have proof of concept,” said Martini. “With Toys ‘R’ Us now gone, brands are struggling to find the best ways to launch and test their products, and since brick and mortar has been such a focus, they now need to begin concentrating on direct-to-consumer and e-commerce solutions.”

New-to-market brands and product lines face some challenges in driving awareness and conversion. Historically, brands have been uncomfortable driving marketing to a listing that has no inventory (rightfully so), and Amazon hesitates to bring in unit quantities without established traffic to the pages. This cyclical dilemma leads to a slow ramp up for product launches, and doesn’t provide the same successful exposure as being on a Toys “R” Us shelf once used to give brands.

Amazon’s Seller Central platform may now provide some solutions. When brands have a third-party retail partner, the brand and seller can work together to ensure an appropriate inventory buy is placed that takes into account stock position and minimizes risk of overstock. Third parties can also control where marketing is placed, and drive traffic to those listings when an in stock offer is available. This can also lead to an increased and improved ROI when attempting to market new products.

While nothing can replace the exclusive in-store experience and feedback Toys “R” Us once provided, this could prove to be an exciting new opportunity that has left toy brands with a gap to fill in their go-to-market strategies.

Cracking the E-commerce Code

In order to be successful on Amazon, toy brands need to have a developed, well-thought-out e-commerce plan, complete with digital first supply chain solutions, digital marketing strategies, and quality content for their product pages. While these benchmarks are achievable, they can present hurdles.

The real challenge of selling on Amazon is the ability to effectively manage all aspects of e-commerce, while simultaneously running large businesses and developing new products. Even with the nimblest of teams, staying on top of an e-commerce platform can be daunting.

As brands begin to diversify beyond the traditional brick and mortar distribution model, many find that their current e-commerce strategy requires more attention and better infrastructure they may not have the resources to handle.


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