Toy stories
Toy shops have historically been a footfall driver for families with younger children. However, even before the pandemic, online sales accounted for 37% of the UK toy market.
Prolonged closures of non-essential retailers during the pandemic meant that people had to shop differently, contributing to online sales increasing to 49% of the market in the twelve months to September 2020.
So, are physical toy shops still relevant?
The Disney Store appears to think not. Total sales for year ending October 2020 were down by just 5%, with the loss of in-store sales offset by higher online revenue. This has contributed to a decision to focus on the continued growth of its online offer, with the company making significant investment to improve consumer experience. Alongside this, the company has been closing its physical stores, retaining just its Oxford Street store in the UK and Grafton Street in Ireland.
Disney is perhaps unique in its ability to have this few stores, but brand awareness is supported by film and TV related merchandise and by products being widely stocked elsewhere.
At the other end of the scale, physical stores remain highly relevant to Toymaster (a group of independently owned toy retailers) who reported that although there were regional variations, their members reported an overall sales increase of 1% in the year ending 31st January 2021, aided by shoppers being reluctant to travel to larger destinations and instead opting to support 'shop local' messaging.
Experience drives footfall and sales
As with many sectors, the toy market is polarised between functional and experiential stores. Disney and Lego stores provide an experience that can't be replicated online, acting as a showroom for the brands and driving overall sales, either through their own websites or via stockists.
In contrast, other than a huge variety of products, Smyths Toys provides a very functional experience, although they do host character themed events to draw shoppers in, while supermarkets provide the ultimate functional offer, with shoppers able to pick up items as part of their weekly shop.
The Entertainer, who reportedly achieve a 10% share of the UK toy market, falls somewhere between the two extremes. With over 170 stores in the UK, its portfolio covers the full spectrum of destinations. Its stores in smaller locations are generally more functional, but in larger locations such as Birmingham (which benefitted from a £1 million refit in 2020) it provides a showcase for the brand and includes interactive areas and 'immersive spaces' for key brands.
Hamley's Regent Street flagship is the ultimate experiential store, and has been a key part of the repertoire for families visiting London since it opened in its current site in 1881, with customers willing to pay a premium price in return for the experience. However, its smaller stores charge the same prices for a more functional experience and it will be interesting to see how their proposition develops as the performance of newer stores becomes clear.
What next for the toy market?
Online will continue to be a key channel for toys, and next year there could be a `new' player in town as Toys R Us is planning to return to the UK with plans for that they refer to as `digital-first' ecommerce, followed by a unique physical experiential offering”.. This physical offer is reported to be an ‘endless aisle’ with a 20-30k sq ft retail space, allowing customers to try out products before ordering any of the target 30-40,000 products, which would then be delivered within minutes from the adjacent distribution centre via integrated cutting-edge robotics.
Amazon 4-Star's first store in Bluewater (seen above) has dedicated c.20% of its selling area to toys and games. With Amazon already a key player in the toy market, its expansion into physical space may assist it in further increasing market share.
Toy box subscriptions such as Whirli are becoming increasingly popular, allowing families to swap toys when children either grow out of or get bored with toys, leading to a reduction in toys heading for landfill and to potentially save money, with toys having a higher value than the price of subscription. This will obviously pull spend away from physical stores, but brands may be able to mitigate the impact by partnering with existing operators, or even by setting up their own schemes.
To sum up...
There is still a role for physical toy shops to play, but to draw customers to them, retailers need to focus on:
Providing an offer that can't be replicated online, either in terms of unique ranges or through the physical space itself providing an experience
Understanding their current and target customers and tailoring the range of products accordingly
As in any sector, those with a clear proposition will continue to attract shoppers, but those with a ‘middle of the road’ position need to adapt to meet the needs of their customers.
Sam Fox