US’s toy wars could mean victory only for consumers

The retailer slashed prices of national brands as well as Target exclusives. The cuts follow a similar move two weeks ago by Walmart, which said it was “rolling back” prices on 100 toys to help families save more in the festive season.

The administration of KB Toys last Christmas left a sizeable gap in the US toy market, with three companies - Walmart, Toys R Us and Target - accounting for about two thirds of the overall market.
The consolidation in the US mirrors a similar situation in the UK, with Woolworths’ demise creating a huge gap for rivals to fill.

Meijer, a general merchandise retailer with about 180 stores in the US’s Midwest region, has also piled into the toy price war, slashing prices on more than 400 popular toys, while offering a number of them for less than $5. Its Toy Price Drop programme includes nearly all toy categories, with up to 30% off Meijer’s normal low prices.

It seems the retail giants intend to use discounts to attract shoppers, and muscle the only remaining national specialist, Toys R Us, out of the market.

Toys R Us is not to be outdone, though, and has come up with an innovative way to catch impulse shoppers. The company is launching 360 pop-up shops called Toys R Us Holiday Express. 260 of them will be located within Babies R Us stores, with 80 as standalone sites located in vacant shopping malls.

Toys R Us is also offering discounts but, unlike its rival, these only last until Thanksgiving - the traditional start of the festive shopping season in the US. Offers include a $10 gift card with each $75 toy bought, and discounts and gifts with purchases of Crayola, Fisher-Price and other brands.

Toys R Us has been battling for some time now to maintain its market share. However, unlike Target and Walmart, it cannot use toys as loss leaders to drive traffic to other departments in its stores. Instead, it has had to innovate with exclusive lines and various unique shop-in-shop concepts. With the entertainment sector unlikely to be as popular as previous years due to the lack of new games consoles or video games, the retailer will be reliant on its core product category.

The danger remains that price will be king in the run-up to Christmas and further price cuts will be needed to entice shoppers. If that is the case, the toy sector could be in for a bumpy ride, with the consumer the only winner.

➤ Greg Hodge, research director, Planet Retail. For more information contact us on:
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