The topsy-turvy year in retail has led to some surprising sights this holiday shopping season.
Best Buy has a Barbie play set in its Black Friday ad. J.C. Penney, which stopped selling electronics and toys in stores more than a decade ago, will have a 55-inch Samsung 4K TV and PlayStation 4 video game consoles as doorbuster deals later this week, in addition to the Lego building sets and LG smartwatches it began selling earlier this year.
And lots of places from Whole Foods to Kohl’s and Macy’s are now selling Amazon Echo devices alongside organic avocados and sweater dresses.
As retailers look for ways to boost flagging sales and to stop shoppers from flocking to the likes of Amazon.com, many are looking to drive more traffic to their stores and websites by adding or expanding their selection of toys and electronics, both of which are popular gift items. The effort also seems aimed at picking up business from other struggling retailers, with experts predicting even more bankruptcies and store closures.
“It feels like the Toys ‘R’ Us bankruptcy is emboldening the number of retailers that are expanding their toy offerings,” said Ken Perkins, an analyst with Retail Metrics. “Sears is also dwindling and has a smaller and smaller electronics business. So there’s market share to be grabbed there.”
Best Buy created for the first time a glossy 24-page toy catalog that it mailed out a couple weeks ago. Displayed inside is a mixture of products such as drones and remote-controlled cars, but also less tech-focused items such as board games, Frozen figurines and L.O.L. Surprise dolls, one of this year’s hottest toys.
The catalog is a reflection of how the Richfield-based electronics chain has expanded its toy assortment in stores and even more so online this year.
“It’s still a small category for us, but it’s a fast-growing category,” said CEO Hubert Joly. “We are clearly known as a destination for entertainment, including gaming and movies — and toys are a natural extension of that.”
While Best Buy might be inching into others’ territories in toys, others have encroached on their electronics specialty, especially during the holidays. This year, for example, devices such as the Amazon Echo and Google Home are popping up all over the place.
“Clearly the voice assistants are very much in this year,” said Joly. “But if you’re going to look for smart home products, we’re the best destination.”
Joly noted that the chain has recently built out dedicated displays for those products in hundreds of its stores and has employees on hand to tell customers about other products that can be connected to them.
Minneapolis-based Target Corp. does a lot of business in both electronics and toys during the holidays. Along with Walmart, it’s one of the largest toy retailers in the U.S. While it hasn’t added much extra shelf space for the category, the company has boasted 14 consecutive quarters of growth in toys, driven in part by exclusive products and licensed properties such as Star Wars. It’s also leaned heavily into the resurgence of board games.
Target has already been picking up market share in toys and CEO Brian Cornell thinks there’s room to gain even more. He’s said he thinks there’s up to $60 billion in sales up for the taking because of struggling or bankrupt retailers.
“We’re playing to win in toys,” he said last week. “We think there’s opportunity to expand share. We expect to put a lot of toys in guests’ baskets during the holiday season.”
Walmart also has been stepping up its game in toys this holiday, with an in-store event earlier this month where kids could play with toys and receive its annual toy catalog.
For department stores, the addition of toys and electronics is in many ways a return to their roots. Decades ago, it was common for them to have seasonal toy shops and everything from TVs to camcorders. But many of them got out of those businesses as specialized big-box stores such as Toys ‘R’ Us, Best Buy and now-defunct Circuit City rose in prominence and were hard to beat on price.
This holiday season, both Macy’s and Herberger’s have added toy shops from FAO Schwarz. In recent years. Chris Byrne, director of content for toy review site TTPM.com, also has noticed retailers from Kohl’s to Barnes & Noble and Cabela’s go deeper in the toy business. Of course, these retailers are not going to take big risks on their assortment and are going to stick with the sure bets, he said.
“They’re going to go with things they know are going to sell,” he said.
While the margins on both toys and electronics are quite thin, retailers hope that customers will then shop other parts of the store or website once they are there — or add the toys after shopping for other items. Parents, Byrne said, aren’t very loyal to specific retailers when it comes to toys at this busy time of year.
“It’s ‘I’ll get it where I can get it,’ ” he said. “And for the manufacturers, it’s another distribution channel” at a time when those channels are narrowing.
Department stores also realize they need to diversify, said Sandy Stein, a Twin Cities-based retail analyst.
“A lot of it has to do with the softness of fashion,” he said. Stores “are being killed by fast fashion and off-price. They’re looking to other areas to balance that out.”
Look at J.C. Penney. Under CEO Marvin Ellison, it has been expanding into new categories. Last year, it began adding appliances to stores, a new initiative that has apparently been successful.
Now it’s branching out into smartwatches and smart home products. While executives say there are no plans for now to carry TVs in stores beyond Black Friday, Penneys will carry a broader assortment of TVs online from brand names such as Samsung and LG, whereas it previously mostly sold off-brand models on its website.
This year, it has also brought toys back to all of its stores. Penneys had exited the toy business in 2004, and tested bringing back the category last year. In the summer, it opened 500-square-foot toy shops and has increased its toy assortment by 40 percent this holiday, including a major partnership with Lego. While it only carried a few top brands last year, this year it has Barbie, Nerf and Hot Wheels.
“For us, getting back into the business was a no-brainer,” said James Starke, a merchandising executive at Penneys. “Toys was a category moms expected us to have. It was a huge void for us.”
Meanwhile, Toys ‘R’ Us is ramping up its marketing this week to ensure consumers know its stores are still very much open for business and will have lots of deals.
Richard Barry, the toy store chain’s chief merchant, said he’s seen retailers “dabble in and dabble out” of toys over time, but they don’t always understand the skill and expertise required to pick the right products and inventories.
“Oftentimes, people get in thinking this is a very simple piece of algebra to solve and they don’t always come out so well on the back end,” he said.
While there was initially some disruption with vendors after its bankruptcy filing, he said things are back on track now.
“We’ve been working hard to ensure our supply chain is pumping and moving product from Asia and getting it distributed to our stores,” he said. “While it was a hiccup, it’s not something which is going to in any way impact our holiday season.”