Heavy Traffic in the Toy Retail Space

HEAVY TRAFFIC IN THE TOY RETAIL SPACE

The Toy Industry Remains Proactive Despite the Loss of a Retail Giant

JULI LENNETT, senior vice president, industry advisor, toys,The NPD Group

NO DOUBT ABOUT IT, THE TOY industry is up against some strong headwinds, from increasing competition with other forms of entertainment to a major retailer shuttering its doors. However, it appears that these disruptors have brought opportunities to an industry that is proving to be resilient, open to thinking differently, and using today’s circumstances as an occasion for growth and transformation.

In the first half of this year, the U.S. toy industry grew by seven percent to $7.9 billion, based on retail sales data from global information company The NPD Group*. While the Toys “R”Us liquidation had a positive effect on sales, it was not the only catalyst for this growth. It is likely that the Toys “R” Us news has kept toys top-of-mind for parents and grandparents when shopping for kids in general, benefitting both consumers and the industry. I am also confident that the strong toy industry growth this year has been at least partially supported by the empathy that people felt in losing a store like Toys R” Us. I think this brought about an emotional response that resulted in parents buying more toys overall.

The strongest growth driver in the first half came from toys priced $5.00- $19.99, led by L.O.L. Surprise!, Total Marvel, Fingerlings, Hatchimals, and Soft’n Slo Squishies.

The influence of these toy properties is also clear when looking at the toy industry’s performance by supercategory.

Youth electronics was the fastest growing supercategory in the market, up 43 percent, driven by Fingerlings, Star Wars, and Tamagotchi. According to NPD’s new report, The Future of Toys, growth in youth electronics is expected to continue over the next year and a half, stemming mainly from robotic/interactive playmates, as manufacturers place heightened emphasis on technology to compete with tech products sold outside of the toy industry.

Sales in dolls grew by 17 percent, led by L.O.L. Surprise!, Hatchimals, and Barbie. These three toy properties alone captured more than two-thirds of the supercategory’s growth. While playset dolls and collectibles has been the star segment within dolls, The Future of Toys highlights that fashion dolls, role-play, and large dolls are expected to perform strongly starting in the second half of next year due to the expected positive effects of the November 2019 movie release of Frozen 2.

A notable turnaround to positive growth since last year is primarily attributby

ed to the box office, as action figures and accessories sales grew by 16 percent. The supercategory was lifted by the movie release of Black Panther in February, Avengers: Infinity War in April, and Jurassic World: Fallen Kingdom at the end of June.

Dinosaur and pony/unicorn-themed toys grew by 77 percent year-to-date through June, and I expect these themes will be trending this holiday season. Driving the dinosaur trend has primarily been Jurassic World, as well as Untamed by Fingerlings and other dinosaur-related products. From makeup to frappuccinos, the unicorn trend has infiltrated many industries, and toys is no exception. While dinosaur toy sales are growing at a brisker pace, pony/unicorn represents a larger portion of toy sales. Among the top 20 new items for June that are moving off shelves at the fastest rate where they are being sold, six have a dinosaur or unicorn theme. They include: Unicorn Sprinkler, Fingerlings Untamed Dino Stealth, Little Tikes Magical

Unicorn Carriage, Jurassic World Roarivores Assortment, Mega Unicorn Island Inflatable, and Jurassic World Indoraptor Rampage at Lockwood Estate.**

From my point of view, the toy retail space has been bustling with activity, and this will continue through the end of this year. Existing toy retailers announced that they will dedicate more space and carry more toys this holiday season, both in-store and online. We are also seeing new store formats emerge that are more experiential, and we will have new toy retailers entering the space. The industry has shown to be proactive in compensating for the dollars Toys “R” Us has left on the table, and more. Toy companies are turning things up a notch, and we should be on the lookout for some major innovations in the toy industry, on both the retail and manufacturer level, that will bring about positive long-term effects. »

*Source: The NPD Group/ Retail Tracking Service/U.S./January-June 2018/Adjusted Dollars

**Based on data from NPD’s Store-LevelEnabled Retail Tracking; required a minimum of 15 percent distribution and zero sales in June 2017

Coinciding with the National Retail Federation calendar, which includes an extra 53rd week in 2018, year-to-date dollar sales and trends have been adjusted to account for the extra week.

Data is representative of retailers that participate in The NPD Group’s Retail Tracking Service. NPD’s current estimate is that the Retail Tracking Service represents approximately 78 percent of the U.S. retail market for Toys.

Juli Lennett, senior vice president, industry analyst for The NPD Group’s U.S. toys division, has spent the past 11 years at NPD managing client relationships and consulting to a variety of manufacturers, licensors, and retailers within the toy industry.