Alexis DeSalva
Alexis DeSalva is a Senior Research Analyst at Mintel. Alexis focuses on US Retail and eCommerce reports.

The departure of the nation’s largest toy store, Toys “R” Us, will undoubtedly impact the competitive landscape of the category. With the closing of Toys “R” Us stores, it could be assumed that interest in toys has declined, but the opposite appears to be true. Not only have sales increased but it’s possible there’s a larger interest in toys because of the decision to close Toys “R” Us, with some parents feeling nostalgic and prompting them to shop. Consumers are still buying toys, but where they are buying from has changed, a reason that contributed to the demise of Toys “R” Us. There’s an opportunity for current retailers to benefit from the void and possibly expand the category footprint.

This leaves two questions to be answered: Which retailers will benefit the most and how will they achieve taking over the category?

Amazon and other big retailers most likely to benefit

Walmart, Amazon, and Target outpaced toy stores as the most shopped retailers for toys and games in the last year. While more than half of those who purchased toys and games shopped any of these retailers, a little more than a quarter visited toy stores for toy purchases, signaling sales have been leaking outside of the channel for some time. Aware of the opportunity, Amazon has already attempted to make an early move on holiday toy shoppers by releasing a toy catalog for the holiday season, mirroring the “Big Book” Toys “R” Us previously published. The book has been mailed to Amazon’s current shoppers and distributed to Whole Foods shoppers both in stores and via the mail.

While more than half of those who purchased toys and games shopped any of these retailers, a little more than a quarter visited toy stores for toy purchases, signaling sales have been leaking outside of the channel for some time.

There could also be potential for smaller players to explore expansion in the category, including drug stores, grocery retailers and even party supply stores. Since grocery and drug stores boast an assortment of items such as food and drink and personal care products, there’s also an opportunity to cross-merchandise existing items with toys that boast a particular character. However, none of these retailers are known as traditional toy destinations and it’s unlikely that only one will be able to cover the category the way Toys “R” Us did in the past.

What we think

The absence of Toys “R” Us will undoubtedly be absorbed by other retailers outside the category, but one thing competitors can’t mirror on a large scale is a destination solely dedicated to toys and games. Despite the likelihood retailers like Amazon, Target, and Walmart will take over the category, retailers will most likely be unable to dedicate as much space to focus on the category as traditional toy stores can, at least not in stores. The retail giants are also unlikely to have the level of customer service dedicated to toys that smaller independent shops offer. Much of the toy category will shift online and retailers with an already established online presence are best suited to take over the category since they can dedicate more space without sacrificing in-store assortments.

While many shoppers are already buying toys online, a greater shift toward online toy sales will impact how they shop the category in the future. Gifting and entertaining will continue to drive spending, but impulsive shopping could be affected with a shift to online. Since most online shoppers browse independently without the company of their children, there could be fewer instances in which a child sees and requests a toy unexpectedly, ultimately leading to a decrease in impulse purchases.

A larger online presence will also impact other factors like product discovery and learning, as well as any need for in-store displays. With shoppers making more toy purchases online, the ability to see and touch products up close is gone, prompting a need for package reconsideration so that online browsers can easily view products without hesitation. All of these factors signal that while online might be the best and most likely channel to takeover toy sales, this shift will not only impact where consumers make toy purchases but how they do so as well.