5 Reasons Why Toys R Us Is A Crucial Partner To The International Toy Industry
It’s not uncommon in the toy industry for people to take Toys R Us for granted.
In many ways the set up of TRU makes it an easier partner for the toy industry to deal with, and the destination approach makes it a potentially powerful sales driver for toy companies and their products.
Here’s 5 reasons why TRU is so important to the toy industry:
1. Global Opportunity & Growth – at the time of writing, TRU has more than 871 stores in the USA, 730 international stores and 230 licensed stores in 36 countries. In terms of market share, we calculate that TRU has (very roughly) c. 6% of the global toy market. That puts Toys R Us in the very top bracket in terms of the biggest global players in toy retail. While the chain may not be so focused on new store openings in some mature markets, global expansion is nevertheless firmly on the cards – late in 2014 the company announced plans for the opening of 90 new stores globally.
2. The Store Format Is Immensely Helpful To The Toy Industry – we recently visited a number of TRU stores in the UK, from mid Jan to end Feb, and while there were some gaps, there was still a huge quantity of stock on shelves. If you compare this to generalist/non specialist retailers who tend to drastically cut back their sku count for toys in the first half of the year (at least in North America & Europe that is), we can see that TRU is carrying significant quantities of inventory into Q1 and taking in new inventory across the board. This leads to less pressure on brand trashing price cuts towards the end of Q4, and the expansive warehouse format means shelves need to be filled regardless of time length to next peak season. This factor alone should make TRU highly cherished by toy companies in an industry where the cashflow/peak sales cycle is one of the most fundamental business challenges to manage.
3. Specialism = Focus On Toys – TRU is focused on our industry and has a great vested interest in it. Whereas many generalist retailers use their toy offering opportunistically to drive in-store/online traffic, regardless of the effect on the health of the industry, TRU is structurally set up to support it.
4. Broader SKU Count – to the best of our knowledge TRU stocks more toy SKUs than any other major ‘bricks and mortar’ toy retailer. This is an operational challenge of some scale for TRU to manage, but it works to the benefit of toy companies as a whole, acting as a facilitator of greater product diversity and supporting more toy company initiatives/developments. As an example, the 2nd area you come to in most TRU stores is the board games aisle. You don’t find such an extensive range of games in many specialist games independents, and you certainly don’t in other (physical world) major toy retailers. In many markets, the TRU listing alone is likely to add up to enough to amortise a significant amount of development and inventory expense.
5. POS Marketing – TRU offers unrivaled opportunity for major brands to make a statement in store. For sure there are showpiece opportunities with some other stores/chains, but not to the same extent as TRU can offer. Whether it’s the latest mega hit movie or a classic brand, TRU’s flexible branding at the main entry point to the toy aisles offers a huge impact statement, combined with strong branded bays throughout the store and in store TV.
So there you have it, Toys R Us is a critically important retail partner to the global toy industry – let’s not take it for granted!