Fisher-Price U.S. vs. Total Preschool at Retail 4,500 4,000 3,500 U.S. $ MILLION
Total Preschool
3,000 2,500 2,000 U.S. Fisher-Price Sales
1,500 1,000 500 0 2008
2009
2010
2011
2012
2013
Source: NPD, SEC Filings and Klosters Retailer Panel
the remainder of the year and is unlikely to reverse itself unless—and until—household income rises significantly. Accelerating Shift in Toy Retailer Market Shares The leading retailers continued to show fairly significant movements in market shares—some lost and some gained— and these trends are accelerating. This is how their positions changed since 2009 according to metrics obtained through the Klosters Retailer Panel:
In Percent of Total
U.S. Toy Retailer Market Shares from 2009 to 2014 35
Wal-Mart
30
Toys “R” Us
24
Target
20
Kmart
15
Amazon
10
eBay
5
Dollar Stores
0
Others Barnes & Noble Source: Klosters Retailer Panel
The two gainers were Amazon and Dollar Stores. The former did this on the basis of convenience; the latter because of close proximity to the majority of the lower-
income consumers and very good value. You cannot beat online buying—as epitomized by Amazon—for convenience, and you cannot beat the Dollar Stores on price. The major losers were Wal-Mart and the “Others”— mainly specialty stores, including Learning Express, small mom-and-pops, and opportunistic entrants such as Walgreens. In the case of Wal-Mart, these market share losses were clearly self-inflicted. The retailer got caught in the quarterly earnings trap. To satisfy the expectations of the financial industry—hedge funds and banks—they had to show continuous improvements in their earnings and they could only achieve this by equally continuously cutting back on staff. Their stores were hence allowed to deteriorate to a level where consumers began to vote with their feet. This deterioration is most obvious in the half-empty shelves, unmanned cash registers, and disgraceful restrooms. Unless Wal-Mart addresses the underlying problem—people and their pay—the store environment will not improve and the company is likely to continue losing market share. Specialty stores do not have the volume to offer the type of prices the mass retailers do and, as a consequence, they are not really competitive. This, too, is not expected to change and will lead to continued declines in market share. The recent announcement that Dollar Tree will acquire Family Dollar will create a behemoth that threatens not only its direct competitor, Dollar General, but also all other mass retailers, which will likely be reflected in accelerated toy market share changes between now and the end of this year. The Toy Industry Consolidates Mid-level toy companies, particularly those that relied on specialty retailers for the majority of their sales, have increasingly fled into the arms of larger competitors over the past 18 months or so. This is not particularly surprising given the consolidation on the retail level, the increasing trend toward price substitution by consumers, and the continued stagnation of the toy market overall, as seen in the chart on page 100. When you look at the list, a few things stand out. One is that Mattel, Spin Master, Toy State, and Goliath, all wellestablished toy companies, bought smaller manufacturers to enter toy categories in which they had had no position up continued on page 100
30 • THE TOY BOOK
SEPTEMBER/OCTOBER 2014