Big-box retailers have been moving quickly to capitalize on the gaping hole left behind, a move that is likely to boost their revenues this holiday season.
“This is good news for shopping center owners, who like to see their tenants enjoy a strong financial position,” says James Cook, who directs retail research at JLL.
Spotting an opportunity
Target Corporation, for one, has more than doubled its holiday toy offerings, and made room for a quarter-million additional square feet of toy-related real estate across 500 stores in an effort to seize on the gap.
“We’ve invested in the toy category this year given the recent closures of Toys R Us stores around the country,” Mart Tritton, Target’s executive vice president, said in an earnings call on Nov. 20 with investors. “So far this year, our toy results have exceeded our expectations in terms of sales and share.”
Toys R Us had accounted for 15 to 20 percent of the country’s total toy sales in 2017, based on estimates from Jefferies. Many of the other retailers that quickly swooped in are seeing success. Target reported that sales at stores open at least 12 months rose 3.2 percent in the earnings period that ended Nov. 3, partly due to sales of toys.
“The winners in the Toys R Us bankruptcy are basically any retailer that sells any toys at all,” says Taylor Coyne, who researches retail at JLL.
Some players that haven’t even traditionally offered toys made major moves, too. Party City, for example, has been opening pop-up “Toy City” stores for the holiday season — some of them in former Toys R Us locations. Best Buy, an electronics retailer, began selling Barbie dolls.
Making a fresh start
Some toy retailers also emerged from the dead. Famed New York toy store FAO Schwarz, which had shuttered in 2015, reopened at a new home in Rockefeller Center.
While many retailers are wise to bulk up their online toy offerings, there is also good reason why stores like Target are investing in the toy sections at physical stores. Grandparents, who make one quarter of all toy purchases according to the NPD Group, enjoy the physical retail experience, with 85 percent buying items in physical stores.
“It’s easy to forget about the grandparent contingent, but they have major purchasing power when it comes to holiday toys,” Coyne says.