David Simpson
Industry Analysis

Channel Migration Alters Fortunes of US Toy Retailers

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The reasons for the surge in toy sales to Walmart and Target include the one stop shopping concept, convenience, inventory selection and low prices. In response, Toys R Us plans to upgrade its locations both in range of products offered and overall ambiance (including spaciousness and customer service).

The bottom line - the same attributes that the retailers are striving to develop in the customer’s shopping experience explode online. Selection can be virtually unlimited as there are no space limitations. The shopping environment is the comfort of your own living room. Photos and streaming videos bring the toys and package contents to life. With no need for high priced retail space, reduced personnel needs and (inevitably for manufacturers) direct access to the final consumer, retail prices will fall dramatically. The inescapable conclusion is that the next transformation in consumer behavior in the toy industry will be the emergence and rapid escalation of sales via the internet channel and the ensuing financial chaos amongst traditional retailers.

David Simpson is the CFO of Floppyboard, Inc. and a member of the San Francisco Analysts Society. He holds a BA from Harvard and an MS Finance from the Univ. of Colorado.

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