Retail

How Toys R Us Kids Became Amazon Adults (And What’s Next)

Toys R Us

There have been a number of great commercial jingles in the history of commercials — tunes so catchy that they stick, almost forever, and remind us of brand names simply by nature of being so catchy. Toys R Us’ famous “Toys R Us Kids” jingle succeeded in doing that, and then some. That jingle also managed to be oddly, and unfortunately, prophetic.

 

Find any human being raised in the United States between 1978 and 1992, and ask them to sing the song. There is a good chance the average American — in their late 20s to early 40s — will be able to get through at least the first few bars. The prophetic part is at the end, when the song notes, “I don’t wanna grow up because, if I did, I wouldn’t be a Toys R Us Kid.”

As it turns out, those “Toys R Us Kids” did grow up. Though, as countless have pointed out over the last five years or so, millennials did make a valiant effort holding off that process by having their mothers do their laundry for as long as possible. However, the core Toys R Us Kids — the group that remembers humming the early ’80s jingle during their entire childhood — have firmly embedded themselves in adulthood. These days, though, we call them Bridge Millennials.

And, as the recent bankruptcy and great sell-off demonstrates — when they grew up, they definitely weren’t Toys R Us Kids anymore. They were much more likely to be “Amazon Adults.”

The Changing Buying Habits Of Millennial Parents

It’s worth noting at the outset that millennials are blamed for killing all kinds of things: home ownership, the diamond engagement ring industry, dressing up for work, physical retail on the whole — the list goes on. Though it has been popular to lay the blame for the fall of Geoffrey at the feet of the Generation Selfie, that narrative needs to be taken with a lot of salt. Not a grain of salt — a whole container.

Walmart actually displaced Toys R Us as the nation’s top toy dealer in 1998 — 20 years ago when older Bridge Millennials were starting college — and much of the generation was still having toys bought for them. At that point in retail history, Amazon was mostly known as an online bookstore. Toys R Us had also taken on a massive amount of debt — thanks to being taken private in 2005, via a $6.6 billion leveraged buyout deal with Bain Capital, KKR, and Vornado Realty Trust. Those massive debt service payments, combined with declining sales, were the double whammy in the demise of the brand.

However, those declining sales remained because the emerging generation of parents — those Bridge Millennial moms and dads — shop and buy in a very different way. This consumer group is extremely prone to using smartphones as commerce tools and using stores as showrooms — a full 14 percent of Bridge Millennials report using retail stores to look at things, but not to buy them.

They are fickle — in fact, by the numbers, they are the most fickle of all consumers. Nearly a third of Bridge Millennials have switched away from or tried a new merchant in the last 30 days. That’s compared to 21 percent for other shopping cohorts.

They are also very enthusiastic about shopping online — definitely not the shopping cohort for which Toy R Us was built. Instead of enhancing and expanding their online sales or mobile capabilities in the early 2000s, Toys R Us doubled down on brick-and-mortar, buying out the competition at KB Toys and FAO Schwartz.

Toys R Us remained slow to respond even as it became apparent that digital was becoming the dominant driver of retail’s future, and cord-cutting siphoned off a robust advertising channel. One of the reasons that most people in their 30s can still sing the Toys R Us jingle is because they heard it on repeat — on their television screens, every Saturday morning, for a decade.

Today, the ardent cord-cutters are millennial parents, according to The Wall Street Journal (WSJ). Toy commercials were once things that children saw regularly — now, children who only watch Netflix hardly ever see them at all. Last June, even the Toys R Us CEO criticized the brand’s website, acknowledging that the store had simply fallen behind contemporary shopping habits.

What’s Next For Toys

What parents are buying for children is clearly changing — that was apparent before the bankruptcy of the nation’s largest toy store, and the collapse was at least partly driven buy it. In the last year, Lego, Mattel, and Hasbro have all reported declining sales for key brands that are generally reliable areas of strength: American Girl, Barbie, and even Star Wars merchandise took a hit.

Conversely, electronic toys for children — tablets and video game consoles — have seen their sales skyrocketing in recent years. But good old-fashioned analog toys have lost a lot of their appeal.

That means, according to some experts, one might expect the market to see a lot of consolidation. Smaller toy brands once relied on Toys R Us, which was responsible for some 12 percent of the toy market’s total annual sales, as a platform for exposure. Those brands will like struggle now, particularly as they must fight with mega players for shelf space, which is now compressed into big-box stores like Walmart or part of an infinite digital-sea on Amazon.

With Toys R Us out of the way, retail power has shifted to Walmart, Target and Amazon. Jackie Breyer, editor-in-chief of industry magazine The Toy Book told Reuters, “A lot of the smaller niche brands that you’d buy, because you’d seen (them) while browsing in Toys R Us, are going to be hit very hard.”

Those smaller niche brands, Beyer noted, will likely spend much time combining with each other in an attempt to build scale. It is also likely many will still fail or be consolidated into one of the large firms.

Yet, there may still remain some room for optimism, because there is much about Bridge Millennials for retailers — even toy retailers — to love. Karen Webster noted in her commentary on the Bridge Millennials data, “They are affluent and well-educated. They are settling into more stable careers and are earning more money.”

Money that — the data shows — they love spending on their children. In fact, according to eMarketer, they actually love splurging on their children. Reports in Romper say those parents may not be spending $15 on Barbie dolls quite as much, but they love spending on educational toys, particularly if those toys are wired up in some way. MediaPost noted that 65 percent of older millennial parents said they’d pay between $41 and $60 for a “smart” toy, while 23 percent said they’d spend “upwards to $80 or more for a connected toy.”

Projected to be a growth industry, Juniper Research predicts smart toy sales will “exceed” $15.5 billion in revenue come 2022.

Toys R Us may be gone, with the toy industry (as we know it) changing and becoming more high-tech. However, the good news is that toys, as a whole, are probably not dead — just evolving for a new generation of parents.

We will miss Geoffrey the Giraffe, but we hope someone nice buys him in the intellectual property auction.

——————————–

Latest Insights: 

The Which Apps Do They Want Study analyzes survey data collected from 1,045 American consumers to learn how they use merchant apps to enhance in-store shopping experiences, and their interest in downloading more in the future. Our research covered consumers’ usage of in-app features like loyalty and rewards offerings and in-store navigation, helping to assess how merchants can design apps to distinguish themselves from competitors.

TRENDING RIGHT NOW

To Top