With Market’s Void, Retailers Look To Omnichannel To Build The Next Toy Store

Retailers are stepping up their kid-friendly offerings amid a growing toy market – and a void left by the closure of Toys R Us – ahead of the busy holiday shopping season. For example, Michaels is taking an omnichannel approach to creative toys and activities by expanding its in-store and online selections. In the retailer’s most recent earnings call, Chairman and CEO Chuck Rubin said the company’s new microsite, michaelskids.com, would have over three times the number of stock-keeping units (SKUs) than its store, “as well as new categories that inspire creativity and imaginative play.”

The site features a combination of the old and the new: Items will range from toy, cars and dolls to an assortment of Science Technology Engineering Arts and Math (S.T.E.A.M.) items. To help organize all of these items, the site plans to roll out features like “Shop By Age.” And to promote the experience to parents and kids, Michaels plans to hold kickoff events at its brick-and-mortar locations that will include toy giveaways, scavenger hunts and pumpkin decorating demonstrations.

Beyond the website, the retailer is planning to bolster its in-store selection of products geared toward kids, bringing in 600 new SKUs. In addition, Michaels has added a school project session that will “include everything a parent needs to create a diorama or foam solar system.” Beyond serving kids and parents, the company noted that teachers make up roughly 4 percent of its customer base “and an even greater percent[age] of our sales.”

For ordering and payments, the company offers several digital options to spur toy purchases, such as free delivery, a buy-online-pick-up-in-store option, a Find It Fast in-store feature on its app and coupons. As Rubin noted in a press release announcing the initiative and microsite, the overall goal is “to be the preferred omnichannel destination for creative play, and we’re committed to making it easy for parents to provide their kids with more mindful, screen-free fun.”

The Craft and Toy Market

Michael’s expansion of kid-friendly items comes as sales of toys around the world are on the move. The NPD Group found that toy industry sales topped $18.4 billion for the first half of the year, marking an increase of 4 percent from 2017. Secondly, NPF found sales of arts and crafts toys rose by 8 percent from January to July. CNBC attributed the jump to the “dollar growth of craft kits,” which increased 13 percent.

Michaels’ move comes as major retailers are stepping in to fill the void left by Toys R Us. Walmart said in August that it is growing its toy assortment by 30 percent in its brick-and-mortar stores, and by 40 percent online. The retailer is rolling out “thousands” of additional items to give customers more options. In a press release announcing the move, Walmart’s Vice President of Toys Anne Marie Kehoe said the retailer has always been a place to find toys, but is now “making even bigger investments in the category to ensure [it has] the widest selection of toys at the best prices.”

Like Michaels, Walmart planned to roll out events as well as demos for its customers to promote its toy selections. The company planned a “National Play Day” in September in over 1,500 of its locations, during which children were able to play with toys, take pictures and take home booklets. In addition, the retailer was to plan demos to highlight toys from brands such as Transformers, Barbie and Ryan’s World, and roadshows for Hot Wheels and Nerf. For recommendations, the company had “hundreds of youngsters” test out toys to create a “Top Rated by Kids” list.

Party City is also getting into the toy business: In June, the company announced that it will open about 50 Toy City pop-up stores this year, as a bankrupt Toys R Us finishes shuttering its last stores this week. Those toy shops will roll out along with the Halloween City pop-up shops the brand operates seasonally, and will be targeted toward “optimal” markets with “attractive leasing opportunities.” Given the struggles some segments of physical retail have experienced in recent years, many retailers have sought to negotiate favorable rates to fill vacant spots.

The bankruptcy of Toys R Us left a fairly large hole in the center of the toy market — not to mention a fleet of large, empty store locations. But Party City believes it can fill in some of that void, despite competition from retailers like Walmart, Amazon, Target, Dollar General, Barnes & Noble and Five Below. In a recent note, Jefferies Analyst Stephanie Wissink said, “Throughout the retail reporting cycle, we’ve heard from a number of large and mid-sized retail chains that they expect to step in to compete in toys in a more meaningful way post-TRU [Toys R Us.]”