Toys ‘R’ Us Australia collapse wake-up call for toy industry?

Toys ‘R’ Us Australia has gone into voluntary administration, following the downfall of the retail giant’s parent company in the US late last year.

The Australian toy and game retailing industry has gone through a difficult time for the last five years, despite solid demand for toys and games, with intense competition from both internal and external operators.

“As a result, the industry’s revenue growth has been relatively weak, at an expected 1.4 per cent over the five years through 2017-18, to $943. million. Similar to the US, external competition for Australian toy and game retailers stems from discount department stores, such as Kmart, along with online-only retailers such as Toy Universe and Online Toys Australia,” state IBISWorld industry analysts.

Toys ‘R’ Us had more than 20.4 per cent market share, making it the largest player in the industry. While demand remains high, consumers have moved online and to discount department stores.

“Toy and game retailers have long been warned that being a simple shop for toys would not be enough to compete, and Toys 'R' Us was not able to adapt fast enough to changing market conditions. The company’s stores failed to attract busy parents, many of whom purchased toys from stores such as Kmart while shopping for other necessities.”

Hopefully, the retailer’s demise will be a lesson learned for other bricks and mortar stores including focusing on niche markets and reduce cluttered inventory.

“Most importantly, many of these incumbent operators are anticipated to shift their emphasis towards creating experience-based destinations for consumers, such as creating instore play areas to generate brand value. The toy and game retailing industry’s revenue is projected to grow at an annualised 1.7 per cent over the five years through 2022-23, to $1 billion.”