Fascinating piece in the New York Times about the impact of Wal-Mart’s dominance in the toy business, especially if it were to finally result in Toys R Us getting out of the toy biz.
Toys R Us reportedly has been considering such a move, though it is by no means a certainty. But Wal-Mart already owns 22 percent of the nation’s toy sales, and there is no sign that it growth will slow down. The NYT reports that just the possibility that Toys R Us could bail out seems to cause a fair amount of anxiety in the industry.
The part of the scenario that would seem to be relevant for other class of trade is the simple loss of shelf space and marketing options that would, in the long run, restrict the ability of many companies to test multiple lines of toys over a long period of time. The assumption seems to be that because a company like Wal-Mart would want to focus only on the top, best-selling toys, there would be less of an opportunity for niche and educational toys to find room to breathe.
There would, of course, be other stores and channels selling toys, and new companies would no doubt emerge to take up whatever slack might be left by a Toys R Us closure. But just the possibility that such a scenario might come to fruition seems to cast a pall on the toy business even as it approaches what should be its best and busiest season.
Toys R Us reportedly has been considering such a move, though it is by no means a certainty. But Wal-Mart already owns 22 percent of the nation’s toy sales, and there is no sign that it growth will slow down. The NYT reports that just the possibility that Toys R Us could bail out seems to cause a fair amount of anxiety in the industry.
The part of the scenario that would seem to be relevant for other class of trade is the simple loss of shelf space and marketing options that would, in the long run, restrict the ability of many companies to test multiple lines of toys over a long period of time. The assumption seems to be that because a company like Wal-Mart would want to focus only on the top, best-selling toys, there would be less of an opportunity for niche and educational toys to find room to breathe.
There would, of course, be other stores and channels selling toys, and new companies would no doubt emerge to take up whatever slack might be left by a Toys R Us closure. But just the possibility that such a scenario might come to fruition seems to cast a pall on the toy business even as it approaches what should be its best and busiest season.
- KC's View:
-
This certainly has always been our fear when any single company grows to the kind of dominance that Wal-Mart has achieved – the lack of diversity that can result as companies focus only on what sells best using a lowest-common-denominator strategy.
It isn’t just about Wal-Mart; it is about any company of that size and clout.
The only good thing, it seems to us, is that such a scenario actually makes it easier for smaller competitors to map out their strategies, because differentiation becomes a matter of survival.
As for the toy business specifically, we suspect that you won’t see any Toys R Us announcements until after the holidays. But if the 2004 holiday season doesn’t meet expectations, look for management there to make a move pretty quickly.
