Citing a recent Reutersreport, RetailWire editor-in-chief George Andersonkicked off last week by bringing an oddity to the attention of our insider retail industry audience: “Something unusual happened this past holiday season. Walmart gave up share of toy category sales.”
Apparently, a series of missteps, including cutting product selection and failing to add floor space before Christmas, contributed to a less than Walmart-like performance for the selling season. Toys ‘R’ Us took full advantage of the opportunity, in many of its stores offering a selection of 7,000 toys to Wal-Mart’s 1,800. Research by NPD Group pegged toy stores as gaining a half-a-point share during the holiday season while mass merchants lost three percent.
Further, Toys ‘R’ Us brought in a large number of exclusive toys to make sure there would be further differentiation from Wal-Mart and Target.
TRU, which filed for an IPO in May of last year, now has a solid holiday season under its belt. Its U.S. sales were up 5.4 percent in December. After years of learning lessons the hard way as Wal-Mart undermined its business, gaining a bit of market share back from the Bentonville Behemoth at a time when the retailer is looking to raise up to $800 million is good timing indeed.
We asked our RetailWire BrainTrust panel of retailing experts if they thought toy stores as a channel have regained the advantage lost over the past couple of decades to mass merchants.
“Walmart’s poor showing in the toy category and loss of market share can be, in my opinion, directly related to the lagging affects of John Flemming’s ‘Project Impact’ debacle,” wrote Charles P. Walsh, president, OmniQuest Resources. Mr. Walsh spent 15 years working in the Wal-Mart offices, specifically in its Global Procurement Division.
“Walmart plans and executes merchandising strategies a year in advance, and while able to affect assortment changes closer to events, the assortment and shelf space were determined under a different executive leadership direction,” commented Mr. Walsh. “In addition to the reduction in assortment and shelf space, Walmart also made a critical mistake in placing a large portion of their assortments in the indoor garden section which quite possibly rendered it invisible to many shoppers.”
TRU’s concentration on making exclusive deals was seen as a key strategic move by many of our commentators.
“TRU gained share by returning their focus to what they began with—the assortment,” wrote Bill Emerson, president, Emerson Advisors. “They returned to being the ‘toy expert’ as opposed to trying to compete on price with the masters of that game. There’s a lesson here for all retailers struggling to compete with the mass giants—it’s the product, stupid. Give customers a superior alternative in product assortments and you will succeed. Try to compete solely on price and you won’t.”
A number of panelists pointed out an element absent from the Reutersarticle; the influence of online sales on holiday shopping habits.
“As a retailer, toys are a hugely inefficient category,” commented independent consultant Gene Detroyer. “Inventory has to be built and can get out of balance easily; sales are concentrated, price-cuts are common and leftovers are more than prevalent. Given a choice between toys, groceries and consumer electronics, there is no choice. Why turn your store upside down to accommodate toys, especially when the consumer is going online?
“Walmart and Target are likely the winners here. They didn’t risk margin. They didn’t risk shelf space allocation and come January, they didn’t have to deal with toys.”
Certainly, not all BrainTrust panelists took TRU’s recent victory as a harbinger of a sustained trend, nor indication that the big boys are incapable of scrappy innovation.
“If sales were not up at TRU, it would be a death knell in the wake of previous losses and the deployment of hundreds of holiday pop-up stores. (What was the ROI on that?),” quipped Carol Spieckerman, president, newmarketbuilders. “I think Target has done a great job of differentiating its toy offerings through exclusives and going a bit old school/retro with classic and developmental toys while offering at-a-price options to keep traffic flowing. Walmart is not ceding its hard-won toy gains to anyone and a wee uptick from TRU certainly doesn’t prove that Walmart has.”