OD6117 The Retail Market For Toys Industry Report

WWW.IBISWORLD.
COM The Retail Market for Toys in the USOctober 2016 1
Game time: Increased spending and greater

efficiency will contribute to modest growth
This report was provided to
Wise Business Plans (212385509)
by IBISWorld on 17 April 2017 in accordance with their license agreement with IBISWorld
IBISWorld Industry Report OD6117

The Retail Market for
Toys in the US
October 2016 Madeline Hurley
2 About this Industry 15 International Trade 29 Revenue Volatility

2 Industry Definition 16 Business Locations 30 Regulation & Policy
2 Main Activities 30 Industry Assistance
2 Similar Industries 18 Competitive Landscape
2 Additional Resources 18 Market Share Concentration 32 Key Statistics
18 Key Success Factors 32 Industry Data
3 Industry at a Glance 18 Cost Structure Benchmarks 32 Annual Change
20 Basis of Competition 32 Key Ratios
4 Industry Performance 21 Barriers to Entry
4 Executive Summary 22 Industry Globalization 33 Jargon & Glossary
4 Key External Drivers
6 Current Performance 23 Major Companies
8 Industry Outlook 23 Walmart Stores Inc.
10 Industry Life Cycle 24 Amazon.com Inc.
25 GameStop Corp.
12 Products & Markets 26 Toys R Us Inc.
12 Supply Chains
12 Products & Services 28 Operating Conditions
13 Demand Determinants 28 Capital Intensity
14 Major Markets 29 Technology & Systems
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

WWW.IBISWORLD.COM The Retail Market for Toys in the USOctober 2016 2
About this Industry
Industry Definition Companies in this industry sell new and products and includes sales from all major
used toys, games and hobby goods. This retail channels, including specialty stores,
reflects the size of the retail market for these merchandisers and internet retailers.
Main Activities The primary activities of this industry are

Retailing traditional toys
Retailing electronic toys
Retailing games
Retailing hobby goods
The major products and services in this industry are

Electronic and video games
Traditional entertainment and learning games
Traditional toys
Similar Industries 42392 Toy & Craft Supplies Wholesaling in the US

Toy and craft wholesalers supply toy retailers with merchandise.
45112 Hobby & Toy Stores in the US

Retailers specializing in hobby and toy sales are included in the Hobby and Toy Stores industry.
45211 Department Stores in the US

Department stores are major retailers of toys and hobby goods.
45331 Used Goods Stores in the US

Retailers in this industry sell used toy and hobby goods.
45411a E-Commerce & Online Auctions in the US

Many e-commerce companies either specialize in toy retail or sell a general line of merchandise that
includes toys.
Additional Resources For additional information on this industry

www.astratoy.org
American Specialty Toy Retailing Association
www.nrhsa.org
National Retail Hobby Stores Association
www.toyassociation.org
Toy Industry Association
Provided to: Wise Business Plans (212385509) | 17 April 2017

WWW.IBISWORLD.COM The Retail Market for Toys in the US October 2016 3
Industry at a Glance
The Retail Market for Toys in the US in 2016
Key Statistics Revenue Annual Growth 11-16 Annual Growth 16-21

Snapshot
$30.5bn -4.4% 0.1%
Profit Wages Businesses
$1.4bn $3.1bn 57,948

Revenue vs. employment growth Per capita disposable income
Market Share
Walmart Stores 2 4.5
Inc. 2
9.4% 0 3.0
Amazon.com Inc. -2
1.5
% change
% change
16.3% -4
GameStop Corp. -6
0.0
13.9% -1.5
-8
Toys R Us Inc.
-10 -3.0
13.6% Year 08 10 12 14 16 18 20 22 Year 10 12 14 16 18 20 22
Revenue Employment
SOURCE: WWW.IBISWORLD.COM
p. 23
Products and services segmentation (2016)
Key External Drivers

Per capita disposable 15.2%
Traditional toys
income
Time spent on
leisure and sports
Number of children
aged nine and younger
E-commerce sales
26.8%
Traditional entertainment
and learning games 58.0%
p. 4
SOURCE:
WWW.IBISWORLD.COM
Industry Structure Life Cycle Stage Mature Regulation Level Medium

Revenue Volatility Low Technology Change Medium
Capital Intensity Low Barriers to Entry Medium
Industry Assistance Low Industry Globalization Low
Concentration Level High Competition Level High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 32

Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook | Life Cycle Stage
Executive The Retail Market for Toys includes a driven up the average industry profit
Summary wide variety of toy and hobby goods sold margin in recent years, as e-commerce
across retail industries as diverse as companies benefit from economies of scale
department stores, warehouse clubs, and are better able to negotiate favorable
specialty retailers, drug stores and online supply and distribution contracts. However,
retailers. The broad spectrum of products the dominance of large companies has
and retail outlets active in the industry also led to heightened consolidation
shelters toy retailing from industry- activity as smaller independent and
specific fluctuation to some degree. specialty retailers scramble for market
However, toys and hobby goods are still share in the increasingly competitive
discretionary and demand is therefore market environment.
influenced by disposable income levels. Online retailers are expected to
Despite recovering disposable income account for an even larger portion of the
levels, total industry revenue has toy retailing market during the five years
to 2021, encouraging further competition
and consolidation activity within The
Consolidation
has risen as a result of increasing Retail Market for Toys. Revenue is
expected to grow at an annualized 0.1%
competition and e-commerce activity to $30.7 billion over the next five years as
these mobile retailers become more
decreased at an annualized 4.4% to reach convenient and appealing to consumers.
$30.5 billion in 2016. This includes a less However, consolidated businesses will
drastic fall of 1.2% in 2016, as online likely need to lay off redundant workers,
operators begin gaining more traction. but will continue to experience increasing
E-commerce retailers are increasingly wage costs due to the necessity of hiring
accounting for a larger share of the total higher wage tech workers to operate in
toy market as consumers become more the online space. Shifting demographic
comfortable with online shopping and trends may also change the market
begin to expect low prices, a wide landscape in coming years as an increase
selection and convenient delivery, which in the number of children, an expected
companies such as Amazon.com offer. growing preference for nonelectronic
The presence of these companies in the play and a decrease in adult leisure time
industry, alongside massive brick-and- potentially soften demand for electronic
mortar retailers such as Walmart, has toys and video games.
Key External Drivers Per capita disposable income Time spent on leisure and sports
Spending on toys is largely A significant portion of toy retailers’
discretionary; therefore, when annual revenue is generated by teenagers
consumers have more disposable aged 15 and older and adults purchasing
income, they will buy more toys and toys and electronic games for personal
upgrade to more expensive toys, both of use. As leisure time increases, these
which positively affect toy retailer consumers will be more likely to spend
revenue. Per capita disposable income is time playing with toys and games and, in
expected to increase during 2016, turn, be more likely to purchase new and
creating an opportunity for toy retailers. additional toy and hobby products. The

Key External Drivers amount of time that teenagers aged 15 and total number of children aged nine and
continued over and adults will spend on leisure in younger is expected to slowly grow
sports is expected to slightly increase in during 2016.
2016. However, the volatile nature of this
driver poses a threat to the industry. E-commerce sales
Many hobby and toy retailers generate a
Number of children aged nine and younger portion of their revenue from online
Although young children do not directly sales. Moreover, online-only retailers
purchase toys, their preferences drive (such as Amazon.com) are gaining an
development in the upstream toy increasingly larger share of the total retail
manufacturing industry, as well as market for toys due to the convenience
demand for retail toys. As the total and wide range of products they offer.
number of young children grows, Therefore, an increase in e-commerce
demand for toys from retailers will likely sales will likely cause toy retailer revenue
increase as parents and other adults to grow. IBISWorld expects e-commerce
purchase more toys for children. The sales to rise significantly in 2016.
Per capita disposable income Time spent on leisure and sports
4.5 hours per day per capita 5.40
3.0 5.35
1.5 5.30
% change
0.0 5.25
-1.5 5.20
-3.0 5.15
Year 10 12 14 16 18 20 22 Year 08 10 12 14 16 18 20 22

Current The Retail Market for Toys includes

nationwide sales of all traditional and Industry revenue
Performance electronic toys, games and hobby goods.
2
These products are discretionary in
nature, but the overall market is still 0
relatively immune to macroeconomic -2
fluctuations. Consumers may not need to
% change
buy toys as they need to purchase food or -4
clothing, but the retail market offers a -6
wide variety of options and price points,
allowing certain sectors of the market to -8
pick up when demand for other toy and -10
hobby goods drops off. A diverse set of Year 08 10 12 14 16 18 20 22
industries satisfies the overall Retail
Market for Toys in the United States. SOURCE: WWW.IBISWORLD.COM
More than half of total toy retail sales are

generated by general merchandise stores has struggled due to shifting consumer
(such as department stores and preferences and intense price
supercenters), with the rest accounted for competition between operators. During
by various retail models, such as specialty the five years to 2016, total toy and hobby
toy stores, electronics stores, drug stores, goods sales are estimated fall an
used good retailers and online retailers. annualized 4.4% to reach $30.5 billion.
Despite the diversity of the participating This includes a more modest decline of
industries, the overall retail toy market 1.2% in 2016.
Competition and Consumers looking to purchase toy and buoying Toys”R”Us’ revenue or profit in
consolidation hobby goods in the United States have recent years, the deals indicate the
many locations they can turn to, in part industry-wide trend toward acquisition
because of the wide definition of toy and as a way of reducing costs and achieving
hobby goods. Traditional toys and games, economies of scale to fight for market
such as dolls and board games, are share. To this end, during the five years
overwhelmingly purchased through to 2016, the total number of industry
brick-and-mortar and online general enterprises has fallen an annualized 1.2%
merchandise or toy specialty retailers. to 57,948 businesses, and the number of
Conversely, customers are increasingly establishments has fallen at an
purchasing electronic toys from a broader annualized rate of 0.5% to 128,477.
category of stores, including electronics For traditional toy retailers, such as
and appliance retailers. However, the Toys”R”Us, competition has primarily
benefits of scale and consolidation have come from general merchandise stores,
appealed to retailers, as indicated by the including warehouse clubs, supercenters
prevalence of merger and acquisition and department stores. These retailers
activity during the past five years. In include juggernauts like Walmart and
2009, major player Toys”R”Us acquired Costco that benefit from well-established
its former competitors eToys.com and KB supply and distribution networks and the
Toys, as well as some of the business ability to offer the lowest prices for toy
assets of FAO Schwarz. Although these and hobby goods. In recent years,
acquisitions have not been successful in e-commerce retailers, such as Amazon.

Competition and com, have further contributed to the these trends have generally caused trouble
consolidation market’s competitive environment by for traditional toy retailers and small
similarly leveraging scale to keep prices specialty businesses, increasing online toy
continued
low and enticing consumers with the retailing activity has slightly mitigated
convenience of online shopping. Although some of the industries losses.
Variable costs Employment and wage figures for The

Retail Market for Toys are based on C onsumershave
estimates of the total employees that sell
toys per store or website. For stores that
returned to buying
only sell toys, all employees are counted. higher-priced toys since
However, for stores and websites that the recession ended
sell a variety of goods, IBISWorld
estimates employees and wages based
on the number of incremental workers The variability of cost structures for
required to handle the sale of toys. industries that cater to The Retail Market
Moreover, e-commerce operators, such for Toys also affects the average profit
as Amazon.com, operate under margin for toy retailers. Large,
significantly different cost structures consolidated retailers that benefit from
than small specialty retailers or large greater cost efficiency will generally
department store chains. experience higher profit margins, while
Due to the inclusion of e-commerce smaller companies will likely face higher
wages, the average industry wage of supply and distribution costs that cut into
about $23,513 is higher for retailers in profit margins. Consequently, some
this industry than it is for many industry retailers have been
individual retail industries. Some of the disproportionately affected by certain
impact of the low-wage, hourly or impacts on profit, such as fluctuations in
temporary workers hired by Toys”R”Us the price of plastic, a major input in toy
to sell gifts during the winter holidays is manufacturing. Nevertheless, industry
canceled out by the high-wage, profit, measured as earnings before
technically skilled workers that Amazon. interest and taxes, has grown since 2011,
com must take on to maintain its toy as consumers have gained disposable
business. Despite proportionately higher income and returned to making higher-
wages, total industry wages have fallen at margin purchases. In 2016, average
an annualized 2.2% to $3.1 billion, in line industry profit is expected to reach 4.6%,
with the industries general decline. up from 4.3% in 2011.

Industry IBISWorld expects the Retail Market for

Toys to grow slowly during the next five
the next five years, the shift towards
e-commerce will also result in higher price
Outlook years, driven by steadily rising disposable competition. As a result, profit margins
income levels, a growing number of are expected to sink lower, especially on
children in the United States and the electronic toys and video games. Overall,
increasing accessibility and convenience during the five years to 2021, industry
of online shopping. Although online sales revenue is expected to rise at an
are expected to drive industry sales over annualized 0.1% to reach $30.7 billion.
E-commerce drives Online retailers are expected to

consolidation increasingly dominate The Retail Market E-commerce operators
for Toys during the next five years,
leading to increased consolidation from
are expected to control an
brick-and-mortar retailers. As consumers increasing share of the total
continue to demand the convenience of market
online shopping and e-commerce
retailers fine-tune their precise
suggestion algorithms, convenient total number of establishments is
delivery and shipping options (such as forecast to also decline at a similar
those offered by Amazon Prime), annualized rate of 0.1%, indicating a
e-commerce sales will account for an relative decrease in the total number of
increasingly larger share of The Retail brick-and-mortar retail outlets.
Market for Toys. Employment and wage trends will
Of all purchases made, 13.6% are mirror the increasing prevalence of
expected to be made online by 2021, online toy retailing and merger and
compared with just 8.2% in 2016, and toy acquisition activity. As consolidation
retailing patterns will likely follow suit. continues and online operations become
Due to the competitive pressure online more efficient, employment and wages
retailers place on traditional stores, the are expected to subsequently decline.
pace of retailer consolidation will likely Consequently, IBISWorld expects
increase as brick-and-mortar retailers employment to fall at an annualized rate
scramble to maintain market share. of 0.1% to 132,483 during the five years
Consequently, IBISWorld expects the to 2021 as consolidated business lay off
total number of industry operators to workers to eliminate redundancies and
decrease an annualized 0.2% over the five minimize labor costs. Wages are expected
years to 2021, to 57,404 businesses. The to stagnate during the next five years.

Back to basics Although adults are an important

determinant of demand for toys due to Traditional
toys are staging
their interest in electronic and video
games, children still make up the most
a comeback, spurred by
important demographic sector for The parental concerns about
Retail Market for Toys. Although screen time
children cannot purchase toys
themselves, their preferences and
interests drive the spending patterns of segment could threaten demand for
their parents, grandparents and other electronic toys.
adults on industry products. The Toy The segment of the population that
Industry Association (TIA), a nonprofit demands electronic toys, such as video
trade association representing a variety games, is generally older. Major retailer
of toy industries, expects retro and GameStop reports that nearly 70.0% of
creative toys to become increasingly all video game players are older than 18.
popular with children in coming years, Although disposable income levels for
indicating a potential growth these consumers are expected to continue
opportunity for traditional games and rising, their leisure time is expected to
toys. This trend will be spurred by stagnate during the five years to 2021,
expected growth in the number of limiting the time they have to play video
children in the United States during the and other electronic games. Electronic
next five years. TIA reports that toys that games will likely continue to generate a
enable children to build, customize and significant portion of total market sales in
explore will be particularly popular in coming years, but IBISWorld expects this
coming years amid parental concerns segment to experience increased
about limiting children’s “screen time,” competition from traditional toys and
or the amount of time spent in front of a games. This could place downward
display screen or monitor. Moving pressure on retailer profit, as these
forward, growth in the traditional toy products are generally lower-margin.

Life Cycle Stage Industry value added is set to decline
over the 10-year period
Toy retailers are entering a phase
of steady consolidation
Per capita consumption of toys is not
expected to significantly change
20 Maturity Quality Growth

% Growth in share of economy
Key Features of a Mature Industry

Company High growth in economic
consolidation; importance; weaker companies Revenue grows at same pace as economy
level of economic close down; developed Company numbers stabilize; M&A stage
importance stable technology and markets Established technology & processes
Total market acceptance of product & brand
15 Rationalization of low margin products & brands
10
Quantity Growth
Many new companies;
minor growth in economic
importance; substantial
5 technology change
The Retail Market for Toys
0
Hobby & Toy Stores
Toy & Craft Supplies Wholesaling

-5 Department Stores Decline
Shrinking economic
Recordable Media Manufacturing importance
Toy, Doll & Game Manufacturing

-10
-10 -5 0 5 10 15 20
% Growth in number of establishments
SOURCE: WWW.IBISWORLD.COM.AU

Industry Life Cycle The contribution of The Retail Market for toy products to remain relatively stable
Toys to the overall economy, also known during the 10 years to 2021, further
as industry value added, is expected to illustrating toy retailers’ maturity.
Thisindustry decline at an annualized 1.5% during the Over the 10-year period, industry
is M
ature 10 years to 2021, well below expected operators have undergone consolidation
annualized GDP growth over the same as the competitive environment heats up.
period of 2.1%. Despite per capita Although some operators have been
disposable income growing over the pushed out of the industry, the falling
period, toy sales have declined due to number of total businesses and
intense price competition and shifting employees does not represent a mass exit
consumer preferences. Even so, toy from The Retail Market for Toys, but
retailers offer a wide variety of products instead indicates a merger and
to many distinct markets, and this scale acquisition period wherein retailers are
protects the overall retail market from consolidating to maintain market share
any significant impact due to changes in a as a result of mounting internal pressure
particular market or product category. from online retailers and large
Additionally, industry products are fully department store chains. Merger and
accepted by consumers and undergo little acquisition activity resulting from market
technological change. Therefore, share pressure is typically indicative of a
IBISWorld expects market acceptance of mature retail market.

Products & Markets

Supply Chain | Products & Services | Demand Determinants
Major Markets | International Trade | Business Locations
Supply Chain KEY BUYING INDUSTRIES

9901 Consumers in the US
Consumers are the major purchasers of toys and game items from retailers; this major market
may be broken down further according to demography. (See Major Markets section for more
information.)
KEY SELLING INDUSTRIES

33461 Recordable Media Manufacturing in the US
Operators in this industry supply video games and entertainment software to retailers,whether
directly or through wholesalers.
33993 Toy, Doll & Game Manufacturing in the US
Operators in this industry supply traditional toys, dolls and games to retailers, whether directly
or through wholesalers.
Products & Services Products and services segmentation (2016)
15.2%
Traditional toys
26.8%
Traditional entertainment
58.0%
and learning games
Total $30.5bn SOURCE: WWW.IBISWORLD.COM
The Retail Market for Toys sells a variety more heavily geared to entertainment rather
of toys and games. Toys such as dolls than learning. This segment currently
and action figures may be classified in generates about 58.0% of industry revenue,
one category, while games may be with this share expected to increase as
broken down further into traditional electronic entertainment slowly displaces
games (such as board games) and more traditional forms of entertainment. In
electronic games (such as PlayStation). addition, this segment benefits from appeal
to a wider consumer demographic. Whereas
Electronic and video games toys and traditional games typically cater to
Nontraditional games are those in children and young adults, video games are
electronic or video form, and relevant also widely popular with older
brands include PlayStation and Xbox. demographics; as such, according to major
Similar to their traditional player GameStop, 68.0% of all video game
counterparts, video games may serve a players are older than 18 while the average
variety of purposes, although they are player is 30 years old.

Products & Markets
Products & Services Traditional entertainment Traditional toys

continued and learning games Traditional toys, including dolls,
Traditional games include puzzles, board dollhouses, action figures and plastic cars,
games and game kits and may serve generate 15.2% of total retail toy market
entertainment or educational purposes. revenue. This segment, referred to as “core
Educational games include science game toys” by major player Toys”R”Us, has
kits, vocabulary game cards, math and steadily declined in recent years. This is
counting games, geography games and due to the age compression phenomenon
bilingual games. These are becoming and the increasing popularity of electronic
increasingly popular as consumers forms of entertainment. Age compression
become more aware of the importance of refers to the phenomenon whereby
interactive learning for early childhood children, who have grown up surrounded
development. In 2015, for example, by technological change, demand
major player Toys”R”Us’ sales of learning entertainment products generally marketed
games significantly exceeded its sales of to older children, including electronic and
classic offerings such as toys and action video game hardware. Still, the relative
figures. Together, entertainment and affordability of traditional toys has kept
learning games in traditional them in stable demand, especially during
(nonelectronic) forms generate 26.8% of periods of low disposable income,
industry revenue, making it the industry’s tempering their decline against newer
second largest product offering. entertainment products.
Demand Toys and games are discretionary items, Other factors affecting demand for toys
Determinants as even learning games are an auxiliary and games include shifts in tastes,
purchase and not a necessity. Since preferences and technology, although
discretionary spending increases in line these shifts impact the popularity of
with higher disposable income, the different product segments, as opposed
primary determinant of demand is the to the general level of demand. For
level of disposable income in the example, increasing attention paid to the
economy. As the economy improves, role of interactive learning in early
parents and grandparents are likely to childhood development has bolstered
resume the purchase of new toys and demand for learning games, while
games for their children. In addition, increasing social acceptance of electronic
sales of electronic and video games, and video games has popularized
which are relatively expensive, purchases of these items by older
substantially benefit from improvements demographics. Meanwhile, the general
in disposable income. Notably, some shift to technology-based forms of
products, such as traditional toys and socialization and entertainment has
pre-owned toys and games, may benefit boosted demand for electronic and video
from periods of low disposable income, games at the expense of more traditional
since they are relatively inexpensive and entertainment products (such as plastic
therefore attractive to cash-strapped toys). Technological development more
families. Nevertheless, these products specifically determines demand for
comprise a small part of the toy retail electronic and video games, as demand
market, and there is an overwhelming is largely dependent on the release of
correlation between disposable income new game versions (or consoles) by
growth and toy and game purchase levels. hardware manufacturers.

Products & Markets
Major Markets Major market segmentation (2016)
3.5%
23.6%
Consumers aged 24 and younger
16.5%
Consumers aged 65 and older Consumers aged 35 to 44
17.5%
Consumers aged 55 to 64
20.9%
18.0%
Total $30.5bn SOURCE: WWW.IBISWORLD.COM
Consumers are the end buyers of toys Consumers aged 25 to 64

and games and may be demographically Consumers aged 25 to 64 account for
categorized as follows: consumers aged 80.0% of all toy and game purchases.
24 and younger, consumers aged 25 to 64 Consumers in this age group are typically
and consumers aged 65 and older. employed and thus able to spend on
discretionary items such as games,
Consumers aged 24 and younger although they are not necessarily end
Consumers aged 24 and younger are users of these items. In fact, the majority
the most influential demographic of consumers in this demographic are
segment in this industry, although they parents or other family members buying
only account for 3.5% of direct toys and learning games for their
purchases. Children aged 14 years and children. Therefore, their consumption
younger have no income and, depends not only on their level of
therefore, do not directly purchase discretionary income but also on the
toys; however, they propel much of the tastes and preferences of the younger
toy and learning game purchases made demographic. Nevertheless, a growing
by consumers aged 24 to 64 (parents) proportion of consumers aged 25 to 64
and those aged 65 and older are buying market products for personal
(grandparents). Teenagers and young end use due to the growing popularity of
adults contribute to the majority of electronic and video games among
direct purchases made by this middle-aged consumers. According to
demographic as they may earn some major player GameStop, the average
income from summer or college work. video game player is 30 years old, with
In particular, teenagers and young 68.0% of all video gamers exceeding the
adults are avid consumers of electronic age of 18. Consequently, this segment’s
and video game hardware, which is share of the total market has grown
gaining popularity among youth at the since 2011.
expense of more traditional forms of
entertainment. This segment has Consumers aged 65 and older
maintained its share of the total retail Consumers aged 65 and older account for
market during the past five years. 16.5% of all sales, very little of which is

Products & Markets
Major Markets purchased for end use. This family members. Expenditure from this
continued demographic generally purchases toys, segment has decreased over the five
learning games and video games for years to 2016, due to more rapid growth
their grandchildren or other young from younger demographics.
International Trade The Retail Market for Toys services US Walmart, may be able to buy and sell
consumers and thus records no inexpensive Chinese dolls, gaining an
international retail. Nevertheless, advantage over other toy retailers that
imports and exports of toys are relevant mainly buy from domestic vendors.
to the procurement operations of toy Nonetheless, trade in toys is recorded
retailers. For example, large retailers at the level of upstream manufacturing
with extensive international and vending industries but not at the
distribution networks, such as retail level.

Products & Markets
Business Locations 2016
West
AK
0.4 New
England
ME
Great Mid- 0.6
Lakes Atlantic 1 2
NY 3
WA MT ND 6.1
5 4
3.1 0.3 MN
Rocky
0.5 2.0
WI
OR Mountains SD
0.3
Plains 2.4 MI
3.1
PA
4.3
6
7
2.0 ID IA OH 9 8
0.6 WY 3.8
0.2
NE
1.0
IL IN WV VA
4.1 2.2 2.8
West NV
0.7 0.6
KY
UT MO
1.0 NC
0.9
1.3 CO KS 2.0 2.9
2.5 0.9 TN
SC
Southeast
1.8
CA 1.3
11.2
OK AR GA
1.1 0.5 AL 2.2
AZ MS 1.0
1.9 NM
0.7 Southwest 0.5
TX LA
1.1 FL
7.2 5.7
West
HI
0.4 Additional States (as marked on map) Establishments (%)
1 VT 2 NH 3 MA 4 RI Less than 3%
0.3 0.8 2.7 0.2 3% to less than 10%
10% to less than 20%
5 CT 6 NJ 7 DE 8 MD 9 DC
20% or more
1.6 2.9 0.3 1.9 0.1

Products & Markets
Business Locations Similar to other retailing industries, toy

Distribution of establishments vs. population
retailers are located in proximity to the
consumers they service. Retailers choose
30
to locate near consumers to create a
convenient shopping experience and to
stay plugged into the latest downstream 20
customer trends and demands.
Therefore, toy retailer establishment
%
concentration corresponds fairly closely 10
to population concentration.
The Southeast, West and Mid-Atlantic
regions of the country are estimated to 0
account for the majority of locations in
West
Great Lakes
Mid-Atlantic
New England
Plains
Rocky Mountains
Southeast
Southwest
2016, with about 21.5%, 17.9% and
15.6% of establishments, respectively.
The Southeast’s dominance is largely
due to its share of the US population, Establishments
representing a 25.6% share of Population
consumers. The Southeast is also SOURCE: WWW.IBISWORLD.COM
particularly attractive to retailers due to

low average wages relative to the rest of house 17.2% and 15.3% of the US
the country, helping operators contain population, respectively. In contrast, the
costs and offer competitive prices Plains, Rocky Mountains and New
without compromising profitability. England regions account for a miniscule
Similarly, the Mid-Atlantic and West share of toy market retailers, in line with
regions are prominent because they their low population densities.

Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks
Basis of Competition | Barriers to Entry | Industry Globalization
Market Share The Retail Market for Toys is numerous small to mid-sized businesses
Concentration characterized by a high level of market operating between one and two facilities
share concentration. IBISWorld and servicing local consumers. As
estimates that the top four toy retailers competition in the toy retail market
Level
account for 73.2% of all sales, with intensifies, the largest (and most
Concentration in Walmart accounting for 29.4% alone. successful) operators will likely increase
this industry is H
igh Consequently, sales are dominated by a their merger and acquisition activity,
small number of supercenters (such as while less profitable operators will be
Walmart), department stores (such as induced to either exit or be bought out.
Target) and specialty retailers (such as As a result, concentration is expected to
Toys”R”Us and GameStop). The considerably increase during the five
remainder of the market consists of years to 2021.
Key Success Factors Having an exclusive sales contract in the spring while educational games
Obtaining exclusive rights to sell certain may be marketed more heavily at the
toys or games represents a significant beginning of the school year.
IBISWorld identifies advantage; it reduces competitive price
250 Key Success pressure and allows operators to charge Access to highly skilled workforce
Factors for a relatively high selling prices. Sales personnel must have a broad
business. The most knowledge of the toys and games
Attractive product presentation available and be customer oriented;
important for this
Toys and games must be presented in a customer service may be a point of
industry are: way which is colorful and consumer differentiation that reduces the necessity
friendly, in order to attract children and of competing on the basis of price.
parents alike.
Development of new products
Stocking seasonal products Successful operators display and present
Retailing the right product at the right new toys and games regularly, to attract
season is critical to maximizing sales; for and retain customers and bolster the
example, outdoor games may be retailed value of their service.
Cost Structure Profit that retail a general line of merchandise,

Benchmarks Profit margins for toy retailers widely such as Target and Walmart, and may be
vary based on a retailer’s particular able to benefit from their economies of
business model. The industry includes scale and negotiate better prices with
small, independent toy retailers that suppliers, allowing them to achieve
generally must contend with higher costs higher profit margins. Online toy
and accordingly suffer lower profit retailers, such as Amazon.com, may also
margins, in addition to large, established be able to keep costs low by eschewing
toy retailers, such as Toys”R”Us and traditional brick-and-mortar expenses
GameStop. Larger operators can, to some such as pricey, high-traffic real estate for
extent, benefit from demand for their retail locations; as such, online retailers
high-visibility brand names and generally also enjoy high profit margins.
consequently enjoy higher margins. The Profit, measured as earnings before
industry also includes large companies income and taxes, is expected to account

Cost Structure for 4.6% of revenue for an average toy retailers may find a market niche by
Benchmarks retailer in 2016. Since 2011, toy retailers’ selling specialty or luxury toys, which can
profit margins have slightly risen as also place upward pressure on purchase
continued
consumer disposable income has costs. Purchases’ share of total retailer
recovered from the recession, and costs has increased during the past five
customers have returned to more years, as costs have risen for both toy
expensive toy purchases, buying higher- production inputs (such as plastic) and
margin items such as electronic games. shipping and transportation (such as the
price of oil).
Purchases
Purchases make up the largest cost for Wages
toy retailers, as is the case for most large Employee compensation, including
retail industries, accounting for 55.9% of wages, salaries and benefits, accounts for
revenue in 2016. Retailers must purchase 10.3% of revenue for an average toy
their wares, either directly from retailer. Both brick-and-mortar and
manufactures or from wholesalers that online retailers rely on employees for a
will likely add an additional markup to variety of daily tasks, including
the price of the product. Large retailers, marketing, managing and maintaining
such as Amazon.com and Toys”R”Us, inventory and providing customer
benefit from their ability to carry a wide service. Online retailers, including
range of toy products, which may, brick-and-mortar retailers with an online
however, drive up their inventory and presence, must also train and retain
purchase costs. Similarly, smaller toy specialized computer-savvy personnel to
Sector vs. Industry Costs
Average Costs of
all Industries in Industry Costs
sector (2016) (2016)
100
4.5 4.6 n Profit
n Wages
10.3
17.2 n Purchases
80 n Depreciation
n Marketing
n Rent & Utilities
n Other
Percentage of revenue
60
55.9
59.2
40
0.9 1.9
9.2
20
0.9 2.3
5.3
17.2
10.6
0

Cost Structure maintain their websites. Large retailer revenue. Online-only retailers,
Benchmarks department stores and specialty toy which lack brick-and-mortar locations,
retailers also hire temporary or seasonal will generally have lower rent and
continued
personnel to help manage the influx of utilities costs, although they still pay for
customers during seasonal periods of rent and utilities on distribution and
high demand, such as the winter storage facilities. Moreover, online
holiday gift-buying season. Most of companies’ depreciation costs may be
these temporary employees are paid higher due to the heavy machinery
hourly, while other toy retailing needed to move the large inventories in
employees (such as web designers) may some online retailer warehouses.
earn more substantial annual salaries Marketing represents an additional 1.9%
that include benefits. Overall spending of retailer revenue, although larger
on wages has remained relatively companies may spend more, while small
constant in recent years. companies mostly rely on word-of-
mouth and less expensive local
Other advertising. Other toy retail costs
Depreciation, rent and utilities costs include insurance, legal and
account for a combined 10.1% of toy bookkeeping fees and shipping costs.
Basis of Competition The Retail Market for Toys is highly general discount stores has resulted in
saturated, with an estimated 128,447 revenue losses totaling almost $1.0
facilities servicing consumers around the billion between 2011 and 2015 in the US
Level & Trend country. The industry is also market. The second-largest specialty toy
ompetition
C in concentrated, with four operators retailer, GameStop, has avoided this fate
this industry is (Walmart, Toys”R”Us, GameStop and largely because it offers a specific product
Highand the trend Amazon) accounting for over two-thirds category (electronic and video games) for
of total sales. Operators compete on the which quality and brand recognition is
is I ncreasing
basis of price, breadth of product important and consumers are more
offerings and customer service, although willing to pay a price premium. However,
price is increasingly becoming the single even GameStop has felt pressure to
most important basis of competition. expand its offering of competitively
priced video games, accordingly
Price increasing its provision of secondhand
General discount stores are able to carry and pre-owned video games.
large volumes of products and sell them
at low prices. As a result, these operators Brand recognition, customer service
have intensified price-based competition Operators also compete on the breadth of
in nearly every retail category, including product offerings and on customer
toys and games, with their popularity service. These can be important points of
rising due to the induced convenience of differentiation that may ease the pressure
one-stop shopping. As a result, specialty of price competition. Stocking
toy retailers are feeling the heat and are recognizable brands may also be essential
under increasing pressure to sell at low to non-price-based competition and may
prices to maintain a revenue stream. For justify high selling prices that bolster
example, major player Toys”R”Us’s profitability. This is especially the case
inability to contain costs and offer with learning games and electronic and
competitive prices to the same degree as video game hardware, for which

Basis of Competition consumers often place a premium on are able to sell at competitive prices
continued name recognition. In this case, retailers without compromising profitability.
that can obtain exclusive distribution Meanwhile, online-only retailers, such as
rights from vendors attain significant Amazon.com, are becoming increasingly
competitive advantage. prominent in the market, reinforcing the
necessity for brick-and-mortar stores to
Online retail expand into e-commerce provision.
The ability to sell toys and games online
is also becoming an increasingly External competition
important basis of competition. More Toy retailers, both specialty and mass
consumers have come to regard based, face some external competition
e-commerce as an affordable and from toy rental companies. Toy rental is
convenient way of purchasing particularly attractive to cash-strapped
merchandise of all kinds. All of the major families unable to afford toy and game
players in this industry have brick-and- purchases. The market for toy rentals
mortar stores but also offer an extensive remains small, posing little external
range of toys and games for internet- threat; however, the toy rental industry is
based purchase. This not only increases a expected to grow, especially as it begins
company’s visibility but also aids in cost to appeal to video game consumers who
containment since it circumscribes much prefer to rent out and trade in game
of the cost of labor. Therefore, retailers consoles as they are released.
Barriers to Entry The Retail Market for Toys has moderate

barriers to entry. New operators Barriers to Entry checklist
Level & Trend experience a variety of challenges, with Competition High

the most prominent being market Concentration High
arriers to Entry
B saturation and heavy price-based Life Cycle Stage Mature
in this industry are competition from existing operators. In Capital Intensity Low
Mediumand S teady particular, discount retailers, including Technology Change Medium
supercenters and department stores, are Regulation & Policy Medium
able to offer large volumes of products at Industry Assistance Low
very competitive prices and exert
pressure on all existing players, including SOURCE: WWW.IBISWORLD.COM
established specialty retailers such as

Toys”R”Us. Established players may be circumscribe these disadvantages, but this
able to counter this pressure by option is only available to large venture
capitalizing on their brand names or by capital firms with established financial
securing exclusive distribution rights capabilities, typically looking to diversify
from vendors, neither of which new operations. Other, smaller businesses may
operators can enjoy. find space for organic entry within niche
As a result, new entrants must product markets in certain locales.
contend with extensive price based- These include the retail of culturally
competition and lack of brand name specific toys and games or learning
recognition. Entry by acquisition of games that cater to a distinct philosophy
existing players may be one way to of early childhood development.

Industry The Retail Market for Toys services in the United States. Therefore, the level of
Globalization consumers in the United States; globalization is low. Nevertheless,
consequently, retailing facilities located international markets matter with respect to
Level & Trend abroad (thereby servicing consumers procurement; for example, retailers may
abroad) are not counted as part of the purchase and distribute low-cost, low-priced
lobalization
G in this market. In addition, the largest players in imported dolls and games to successfully
industry is L owand the market were all founded and are based compete and retain market share.
the trend is S teady

Major Companies
Walmart Stores Inc. | Amazon.com Inc.
GameStop Corp. | Toys R Us Inc. | Other Companies
Major players Toys R Us Inc. 13.6%

(Market share) Amazon.com Inc. 16.3%
26.8%
Other
GameStop Corp. 13.9%

Walmart Stores Inc. 29.4% SOURCE: WWW.IBISWORLD.COM
Player Performance Walmart Stores Inc. was founded by Sam retail; however, the entertainment
Walton in 1962 in Rogers, AK. Today, the segment, which includes toys as well as
company is the largest retailer in the other products, generates a considerable
Walmart Stores Inc. world, and over half of it is owned by the 10.0% of revenue. Walmart is
Market share: 29.4% Walton family. Walmart employs 2.3 distinguished for the breadth of its
million workers and operates over offerings and its incomparably low prices.
11,500 locations domestically and Toys offered include action figures, riding
globally. The company generated a toys, dolls and dollhouses, interactive
staggering $482.1 billion in revenue in toys, development and learning toys,
2015. Although toy retailing accounts for outdoor-play toys, playhouses, robotic
a small part of Walmart’s business, the pets and puzzles. Consumers may shop
company’s sheer volume of sales makes by age group, gender or brand.
it the largest market player. Walmart’s
retail of toys is expected to generate Financial performance
$9.0 billion in 2016, accounting for a Walmart has easily maintained its
small portion of company revenue but dominance in the toy retail market.
representing a significant share of the Following a dip in revenue during the
total toy retail market. recession, sales have fully turned the
Walmart operates in six segments, or corner in recent years. The company’s toy
strategic merchandise units: grocery, retailing operations are expected to grow
entertainment, health and wellness, at an average annual rate of 2.0% during
hardlines, apparel and home. Half of the the five years to 2016, including mild
company’s revenue comes from grocery forecast growth of 0.5% during 2016.
Walmart (toy retail operations) - financial performance*

Revenue Operating Income
Year ($ million) (% change) ($ million) (% change)
2011 8,130.2 N/C 567.9 N/C
2012 8,347.0 2.7 583.8 2.8
2013 8,481.4 1.6 591.3 1.3
2014 8,720.9 2.8 587.5 -0.6
2015 8,951.2 2.6 526.6 -10.4
2016* 8,993.4 0.5 512.8 -2.6
*Estimates
SOURCE: ANNUAL REPORT AND IBISWORLD

Major Companies
Player Performance Consequently, industry-relevant revenue 5.7% of revenue in 2016. Although

continued is expected to reach $9.0 billion, giving it Walmart’s selling prices are low, the
control of almost one-third of the US toy company maintains acceptable profit
retail market. Profit margins have margins through aggressive cost
fluctuated somewhat over the period, containment and achieving economies of
with profit accounting for an estimated scale in distribution and retail.
Player Performance Listed as one of the top 100 companies in sale from one of its sellers is made,
Fortune magazine, Amazon.com Inc. has Amazon then takes a percentage of the
harnessed its online-selling platform to sale. Additionally, Amazon Prime, the
Amazon.com Inc. grow into a multibillion-dollar company company’s loyalty program that
Market share: 16.3% with more than 230,000 employees. customers can join for a fee, provides
Incorporated in 1994 as an online customers with free two-day delivery
bookseller, this publicly listed, Seattle- on certain products to encourage
based company has expanded its product repeat purchases. In 2016, industry-
range to include music, DVDs, videos, specific revenue is expected to reach
wireless products, consumer electronics, $5.0 billion.
hardware, lawn and patio items, clothing,
kitchen products, snacks and a variety of Financial performance
other products. In 2015, total company As with the industry as a whole,
revenue exceeded $107.0 billion. Amazon’s toy sales segment has
Industry-specific revenue is generated experienced rapid growth over the five
from the company’s sales of toys and years to 2016. Despite the sluggish
video games, which are a part of the economy early in the period, Amazon
merchandise and electronics segment. continued to experience rapid revenue
Amazon’s business model is key to its growth as consumers shifted their retail
wide selection of products. By allowing activity from brick-and-mortar stores to
businesses to sell their products on online alternatives. Revenue from
Amazon, Amazon can offer diverse Amazon’s toy and game sales has
products without having to hold increased an average 29.2% annually in
everything in its warehouses. When a the five years to 2016, including a
Amazon Inc. (US industry-specific toy sales) - financial performance*

2011 1,385.2 N/C 74.6 N/C
2012 1,861.8 34.4 127.4 70.8
2013 2,398.8 28.8 93.3 -26.8
2014 3,081.4 28.5 103.4 10.8
2015 4,082.5 32.5 222.8 115.5
2016* 4,979.3 22.0 282.0 26.6
*Estimates

Major Companies
Player Performance projected 22.0% increase in 2016 alone an annualized rate of 30.5% over the
continued to $5.0 billion. Similarly, industry- five years to 2016 to an estimated
specific operating profit has grown at $282.0 million by the end of this year.
Player Performance GameStop Corp. was founded in 1994 as an initial trade-off between revenue and
the result of a series of mergers between profitability, since costs are very high
Babbage’s, a small software retailer in and profit margins remain low, despite
GameStop Corp. Dallas, and other software retailers. heavy demand. Later into the cycle, the
Market share: 13.9% Today, the company is the largest video volume of sales is sufficient to cover
game and entertainment software costs, and selling prices may rise as
retailer in the world, operating 4,013 consumers purchase accessories and
stores in the United States in addition to related products. Both trends bolster
over 2,100 stores across Canada, Europe profitability and justify continuous
and Australia. The company is expected investment in new releases.
to generate $9.4 billion in total revenue
in 2016. Financial performance
The company derives the majority of The company’s video game retail
its revenue from video games and business in the United States is expected
entertainment software, although it also to generate about $4.2 billion in revenue
sells magazines, phones and tablets. for the company during the five years to
Video game consoles offered include 2016. This figure represents an
PlayStation, Xbox and Wii; however, annualized 5.1% decline over the five-
sales of these products are highly year period; this average rate conceals
seasonal and correspond to the release of year-on-year fluctuations, with revenue
new console versions (such as PlayStation falling through 2016 with the exception
4). The release of new consoles is of 2015. Even so, over the five years to
necessary for maintaining revenue 2016, improved incomes and higher
streams, since consumers who want to discretionary spending are expected to
buy video games will often prefer to wait contribute to profit margins of 8.2% for
for the new version than invest in the the company. This figure is considerably
existing one. Release cycles often involve higher than the profit margins of other
GameStop Corp. (toy retail market) - financial performance*

Year** ($ million) (% change) ($ million) (% change)
2011-12 5,517.0 N/C 417.2 N/C
2012-13 5,263.3 -4.6 426.6 2.3
2013-14 4,244.0 -19.4 320.6 -24.8
2014-15 3,916.6 -7.7 305.6 -4.7
2015-16 4,539.2 15.9 355.7 16.4
2016-17** 4,246.3 -6.5 346.4 -2.6
*Estimates; **Year-end January


Major Companies
Player Performance nonspecialty toy retailers, such as discretionary good. Even so, over the five
continued Walmart and Costco. Video game years to 2016, the company has declined
purchases heavily depend on average its share of the market due to external
income levels, since the product is both competition from big-box stores and
relatively expensive and considered a online operators.
Player Performance Toys”R”Us Inc. was founded in 1948 in blocks, dolls, stuffed animals, video
Washington, DC as “Children’s Bargain games, outdoor-play and learning and
Town,” adopting its current name in education toys.
Toys R Us Inc. 1957. Today, the company is based in
Market share: 13.6% Wayne, NJ and employs more than Financial performance
62,000 people in 1,622 locations across The company has not fared well over the
the world. It has market presence in past five years. Between 2011 and 2015,
Canada, Europe, Australia, Latin America the company recorded more than $2.1
and Asia but derives over half of its billion in revenue losses, largely due to
revenue from its US operations. The declining competitiveness in the
company’s total revenue reached $11.8 domestic toy retail market. This situation
billion in 2015, representing a drastic loss is not expected to change anytime soon,
of $2.1 billion over the past five years. given the mounting levels of debt the
In the United States, Toys”R”Us company is accruing to stay afloat.
distributes children’s toys, in addition to Overall, the company’s relevant sales are
clothing and baby products. Toy retailing expected to fall by an annualized 2.6%
is expected to generate $4.2 billion for during the five years to 2016, with sharp
the company in 2016, giving it a market losses from 2012 onward. Consequently,
share of 13.6%, making it the second- Toys”R”Us has been slowly losing its
largest specialty toy and game retailer share in the domestic toy retail market,
behind GameStop. Toys are differentiated largely to general retailers such as
by gender, age, character and brand, but Walmart and Costco, which are offering
are generally marketed as premium toys at much lower prices. This reflects
products at moderate prices. They the increasing importance of price
include action figures, building sets and competition in the toy retail market in
Toys”R”Us (toy retail operations) - financial performance*

2011 4,743.7 N/C 84.2 N/C
2012 4,598.5 -3.1 21.4 -74.6
2013 4,282.6 -6.9 -196.2 N/C
2014 4,205.2 -1.8 106.7 N/C
2015 4,177.5 -0.7 214.7 101.2
2016* 4,155.5 -0.5 267.9 24.8
*Estimates

Major Companies
Player Performance addition to the convenience of one-stop an expected 6.4% in 2016. This is largely a
continued shopping in department stores and result of the closure of less-profitable store
supercenters. Profit, on the other hand, has locations over the course of the period,
increased from 1.8% of revenue in 2011 to along with other cost cutting measures.
Other Companies Target Corp. United States after Walmart. The

Estimated market share: 3.8% company is a membership-only
The Dayton Dry Goods Company was warehouse club with a rapidly expanding
founded in 1902 and became the Target member base, both domestically and
Corp. in 1962. Target was developed as internationally. Today, the company
an upscale-discount retailer, and by the employs close to 205,000 people in 697
1980s, the company began its expansion locations across North America, Europe,
as one of the major retailers in the Australia and East Asia and offers
country. Today, the company is products in a variety of merchandise
headquartered in Minneapolis and categories. Costco’s consolidated revenue
employs over 360,000 people in about is reached $113.7 billion in 2015. Costco
1,800 US locations. Target stores carry a divides merchandise into the following
variety of goods at discounted prices, five categories: sundries which include
including groceries, clothing, jewelry, candy, snack foods and beverages;
health supplies and hardware supplies. hardlines, which include major
Toys are retailed in the hardlines appliances, sporting goods and toys;
segment and include action figures, softlines, including apparel and jewelry;
building sets, dolls, games and puzzles, dry and institutionally packaged food;
stuffed animals and plastic vehicles. and fresh and perishable food. Toys
These products are expected to generate include arts and crafts, building blocks,
$1.2 billion in revenue for the company education toys, dolls and dollhouses,
by 2016, giving it a 3.8% share in the toy remote-control vehicles, pretend play
retail market. Target, though smaller in and outdoor-play sets. Each of these is
the toy retail market than counterparts further broken down by price range,
Walmart and Costco, has maintained brand and color.
relatively high profit margins at about Thanks to its expanding member base,
7.5% of revenue due to its reputation as Costco’s performance in the toy retail
an upscale-discount store and its ability market has been impressive. Costco’s
to charge more favorable prices. industry relevant revenue is expected to
reach $904.5 million in 2016. This
Costco Wholesale Corp constitutes a small share of Costco’s
Estimated market share: 3.0% overall sales but continued improvement
Costco Wholesale Corp., founded in 1976 in Costco’s position is likely to compete
in San Diego, has grown to become the with larger industry players in terms of
second-largest general retailer in the market share during the next few years.

Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility
Regulation & Policy | Industry Assistance
Capital Intensity The Retail Market for Toys experiences a

low level of capital intensity, although the Capital intensity
Capital units per labor unit
exact ratio of capital expenditures to
Level
labor costs can vary significantly based 0.5
The levelof capital on a company’s size, offerings and
intensity is L ow business model. On average, toy retailers 0.4
spend about $0.09 on capital costs for 0.3

every $1.00 spent on labor. Although
industry operators must significantly 0.2
invest in employees to carry out 0.1

marketing, inventory and customer
service operations, depreciation also 0.0
Economy Retail Market The Retail
represents a significant cost for many Reports Market for Toys
industry operators. Brick-and-mortar Dotted line shows a high level of capital intensity
retailers must invest in shelving and SOURCE: WWW.IBISWORLD.COM
displays as well as computerized point-

of-sale (POS) systems and inventory only retailers may need forklifts and
management equipment, while online- other heavy machinery to move goods
Tools of the Trade: Growth Strategies for Success
New Age Economy Investment Economy

Recreation, Personal Services, Information, Communications,
Health and Education. Firms Mining, Finance and Real
benefit from personal wealth so Estate. To increase revenue
stable macroeconomic conditions firms need superior debt
are imperative. Brand awareness management, a stable
and niche labor skills are key to macroeconomic environment
product differentiation. and a sound investment plan.
Capital Intensive
Labor Intensive
Hobby & Toy Stores The Retail Market for Toys

Toy & Craft Supplies Wholesaling
Traditional Service Economy Old Economy
Department Stores
Wholesale and Retail. Reliant Agriculture and Manufacturing.
on labor rather than capital to
Recordable Media Manufacturing Traded goods can be produced
sell goods. Functions cannot Toy, Doll & Game Manufacturing using cheap labor abroad.
be outsourced therefore firms To expand firms must merge
must use new technology or acquire others to exploit
or improve staff training to economies of scale, or specialize
increase revenue growth. in niche, high-value products.
Change in Share of the Economy SOURCE: WWW.IBISWORLD.COM

Capital Intensity around vast warehouses. Capital intensity consolidation has led some companies to
continued has slightly increased for toy retailers reduce labor redundancies and benefit
during the past five years, as from lower wage costs.
Technology & Systems Technological changes affect brick-and- Technologically enabled service solutions
mortar locations and online companies in (such as cutting-edge product suggestion
Level significantly different ways. Although algorithms and inventory management
most brick-and-mortar retailers have systems that allow for the fastest, most
The level
of websites with online-shopping options, efficient delivery times) represent a
Technology Change technology costs for these stores are significant competitive edge for online
is M
edium relatively low and unchanging. Brick- companies. As such, ensuring that they
and-mortar stores may have to develop are at the forefront of advances in
and maintain their websites and engage relevant technological fields will allow
in online advertising, but generally have online retailers to continue to entice
higher traditional retail technology costs, customers with their selection,
such as the implementation of automated suggestions and convenience. At the
inventory management systems or same time, online retailers are more
point-of-sale (POS) technology. subject to online fraud and other
As such, major technological changes security-related business issues, as a data
will be less impactful for these retailers breach jeopardizing customer
than it will be for online companies. information can be particularly damaging
Online companies operate entirely in the to a company’s brand. Accordingly,
online space and, as such, must rely on online companies will also have to invest
technologically enabled tools to reach out more than traditional retailers in data
to customers and satisfy their needs. security systems.
Revenue Volatility Annual revenue volatility is relatively low wide variety of retailers that serve the toy
for toy retailers, particularly due to the market. Although some small operators
Level
The level of A higher level of revenue Volatility vs Growth
Volatility is L ow volatility implies greater
industry risk. Volatility can 1000 Hazardous Rollercoaster
negatively affect long-term
Revenue volatility* (%)
strategic decisions, such as 100

the time frame for capital
investment.
10
When a firm makes poor
investment decisions it
may face underutilized 1 The Retail Market for Toys
capacity if demand
suddenly falls, or capacity 0.1 Stagnant Blue Chip
constraints if it rises –30 –10 10 30 50 70
quickly. Five-year annualized revenue growth (%)
* Axis is in logarithmic scale

Revenue Volatility (especially those that retail expensive goods) player Toys”R”Us reports that it
continued may have trouble during unsure financial consistently generate more than 40.0% of
times, toy sales revenue from stores with its annual revenue during the fourth
less expensive products (such as department quarter of the year, when it is the holiday
stores and used-goods stores) can generally gift-giving season. To take advantage of
pick up the slack in these times. Video game the onslaught of demand during the
retailers are subject to higher revenue winter months, many toy retailers,
volatility than other toy retailers because including Toys”R”Us, roll out special
purchases of video game consoles and their promotions during this time, including
related games and accessories closely implementing promotional pricing,
correlate with the release of a latest- offering additional in-store services, such
generation system. as gift wrapping, and opening pop-up or
Nevertheless, toy store revenue is express retail outlets in shopping centers
extremely seasonally volatile. Major or other convenient locations.
Regulation & Policy A significant amount of toy regulation designed and intended for children under
exists in the United States because most 12 years of age, including the vast
toys are designed for children’s use, and majority of industry products. If stores
Level & Trend therefore have stringent safety are found selling items that do not meet
he level of
T requirements. Nevertheless, most the new federal regulations, they are
Regulation is regulation for toys is implemented at the subject to criminal and civil charges
Mediumand the manufacturing level, as represented by under the act, with fines up to $100,000
the Toy, Doll and Game Manufacturing for each violation on top of prison
trend is S
teady
industry (for more information, see sentences up to five years.
IBISWorld report 33993). The Consumer Toy retailers are also subject to similar
Product Safety Improvement Act, passed regulations that all retailers face,
by Congress in 2008, aims to protect including state and federal antitrust laws,
children from unsafe levels of lead and the Fair Labor Standards Act and state
phthalates by banning the sale of all working conditions regulations. Store
children’s products that do not meet owners also must comply with the
strict requirements. In addition to provisions of the Americans with
placing regulatory controls on Disabilities Act of 1990, as amended,
manufacturers, CPSIA also requires which generally requires that stores be
retailers to test all products and parts accessible to customers with disabilities.
Industry Assistance Key tariffs turn, significantly impact retailers’

Tariffs are applicable to goods supplied purchase costs.
by this industry, but they do not directly
Level & Trend affect the retail level. Instead, retail Industry associations
he level of
T operators purchase goods from Because toy retailers may fall under a
Industry Assistance manufacturers or wholesalers after tariffs wide variety of retail industries, a
is L owand the have already been applied. Nonetheless, similarly wide array of industry
changes to key tariffs on toys and hobby associations represents retailer interests.
trend is S teady
goods can affect toy prices, which can, in The Toy Industry Association (TIA) is a

Industry Assistance nonprofit trade association that mutual business benefit and organizes a
continued represents manufacturers and importers yearly conference to this end.
of toy and youth entertainment products. Other larger industry organizations
TIA has a long history of leadership in toy also include retailers who are outside of
safety and was responsible for developing The Retail Market for Toys. The National
the first comprehensive toy safety Retail Federation (NRF) represents more
standard. Although TIA represents than 1.6 million establishments
manufacturers, it assists the retail nationwide and includes such diverse
industry by providing research into retail outlets as department stores,
industry sales trends and promoting toy grocery stores and mail-order companies.
products at its trade shows, events and in In addition to lobbying for retail
the media. The American Specialty Toy interests, NRF also maintains
Retailing Association (ASTRA) is technological standards to help all retail
similarly toy focused, although ASTRA businesses minimize the cost of
primarily represents retailers of specialty technology implementation, which
toys and hobby goods. ASTRA helps toy includes a trade organization for retail
retailers network with one another for marketing professionals.

Key Statistics
Industry Data Industry No. of children
Revenue Value Added Establish- Wages Domestic 9 and younger
($m) ($m) ments Enterprises Employment Exports Imports ($m) Demand (Mils)
2007 47,542.9 5,803.0 136,268 68,934 157,035 -- -- 3,520.9 N/A 39.8
2008 45,128.0 5,246.8 132,127 64,746 149,839 -- -- 3,351.5 N/A 40.2
2009 41,413.7 5,160.2 130,394 62,581 150,137 -- -- 3,358.7 N/A 40.4
2010 39,852.9 5,329.4 130,930 62,158 148,571 -- -- 3,476.2 N/A 40.5
2011 38,231.8 5,494.1 131,897 61,520 148,136 -- -- 3,506.0 N/A 40.5
2012 36,265.9 5,171.9 132,062 59,965 142,291 -- -- 3,376.7 N/A 40.5
2013 33,970.8 5,146.0 133,268 60,158 143,398 -- -- 3,430.4 N/A 40.5
2014 31,717.6 5,030.0 130,013 58,733 136,902 -- -- 3,237.9 N/A 40.5
2015 30,928.4 4,917.7 129,207 58,351 134,620 -- -- 3,170.6 N/A 40.4
2016 30,544.8 4,820.7 128,477 57,948 133,193 -- -- 3,131.8 N/A 40.5
2017 30,627.5 4,818.7 129,041 58,127 133,629 -- -- 3,142.6 N/A 40.6
2018 30,732.9 4,809.2 128,662 57,840 133,307 -- -- 3,139.8 N/A 40.7
2019 30,708.1 4,793.0 128,820 57,847 133,298 -- -- 3,138.8 N/A 40.8
2020 30,808.0 4,763.4 128,240 57,489 132,754 -- -- 3,131.6 N/A 40.8
2021 30,723.1 4,729.3 128,135 57,404 132,483 -- -- 3,124.0 N/A 41.1
Annual Change Industry Establish- Domestic No. of children

Revenue Value Added ments Enterprises Employment Exports Imports Wages Demand 9 and younger
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
2008 -5.1 -9.6 -3.0 -6.1 -4.6 N/A N/A -4.8 N/A 1.0
2009 -8.2 -1.7 -1.3 -3.3 0.2 N/A N/A 0.2 N/A 0.5
2010 -3.8 3.3 0.4 -0.7 -1.0 N/A N/A 3.5 N/A 0.2
2011 -4.1 3.1 0.7 -1.0 -0.3 N/A N/A 0.9 N/A 0.0
2012 -5.1 -5.9 0.1 -2.5 -3.9 N/A N/A -3.7 N/A 0.0
2013 -6.3 -0.5 0.9 0.3 0.8 N/A N/A 1.6 N/A 0.0
2014 -6.6 -2.3 -2.4 -2.4 -4.5 N/A N/A -5.6 N/A 0.0
2015 -2.5 -2.2 -0.6 -0.7 -1.7 N/A N/A -2.1 N/A -0.2
2016 -1.2 -2.0 -0.6 -0.7 -1.1 N/A N/A -1.2 N/A 0.2
2017 0.3 0.0 0.4 0.3 0.3 N/A N/A 0.3 N/A 0.2
2018 0.3 -0.2 -0.3 -0.5 -0.2 N/A N/A -0.1 N/A 0.2
2019 -0.1 -0.3 0.1 0.0 0.0 N/A N/A 0.0 N/A 0.2
2020 0.3 -0.6 -0.5 -0.6 -0.4 N/A N/A -0.2 N/A 0.0
2021 -0.3 -0.7 -0.1 -0.1 -0.2 N/A N/A -0.2 N/A 0.7
Key Ratios Imports/ Exports/ Revenue per Share of the

IVA/Revenue Demand Revenue Employee Wages/Revenue Employees Average Wage Economy
(%) (%) (%) ($’000) (%) per Est. ($) (%)
2007 12.21 N/A N/A 302.75 7.41 1.15 22,421.12 0.04
2008 11.63 N/A N/A 301.18 7.43 1.13 22,367.34 0.04
2009 12.46 N/A N/A 275.84 8.11 1.15 22,370.90 0.04
2010 13.37 N/A N/A 268.24 8.72 1.13 23,397.57 0.04
2011 14.37 N/A N/A 258.09 9.17 1.12 23,667.44 0.04
2012 14.26 N/A N/A 254.87 9.31 1.08 23,730.95 0.03
2013 15.15 N/A N/A 236.90 10.10 1.08 23,922.23 0.03
2014 15.86 N/A N/A 231.68 10.21 1.05 23,651.22 0.03
2015 15.90 N/A N/A 229.75 10.25 1.04 23,552.22 0.03
2016 15.78 N/A N/A 229.33 10.25 1.04 23,513.25 0.03
2017 15.73 N/A N/A 229.20 10.26 1.04 23,517.35 0.03
2018 15.65 N/A N/A 230.54 10.22 1.04 23,553.15 0.03
2019 15.61 N/A N/A 230.37 10.22 1.03 23,547.24 0.03
2020 15.46 N/A N/A 232.07 10.16 1.04 23,589.50 0.03
2021 15.39 N/A N/A 231.90 10.17 1.03 23,580.38 0.03
Figures are in inflation-adjusted 2016 dollars. SOURCE: WWW.IBISWORLD.COM

Jargon & Glossary
Industry Jargon E-COMMERCEThe buying and selling of products and SCREEN TIMEAny time that is spent in front of a
services over electronic systems such as the internet. screen, such as a TV, computer, smartphone or video
INTERACTIVE LEARNINGA pedagogical approach game console.
that relies on hands-on processes for relaying
information.
POINT-OF-SALE (POS) SYSTEMA system used at
checkout in retail stores that uses computers and cash
registers to capture transaction data at the time and
place of sale.
BARRIERS TO ENTRYHigh barriers to entry mean that INDUSTRY CONCENTRATIONAn indicator of the
IBISWorld Glossary new companies struggle to enter an industry, while low dominance of the top four players in an industry.
barriers mean it is easy for new companies to enter an Concentration is considered high if the top players
industry. account for more than 70% of industry revenue.
CAPITAL INTENSITY Compares the amount of money Medium is 40% to 70% of industry revenue. Low is less
spent on capital (plant, machinery and equipment) with than 40%.
that spent on labor. IBISWorld uses the ratio of INDUSTRY REVENUEThe total sales of industry goods
depreciation to wages as a proxy for capital intensity. and services (exclusive of excise and sales tax); subsidies
High capital intensity is more than $0.333 of capital to on production; all other operating income from outside
$1 of labor; medium is $0.125 to $0.333 of capital to $1 the firm (such as commission income, repair and service
of labor; low is less than $0.125 of capital for every $1 of income, and rent, leasing and hiring income); and
labor. capital work done by rental or lease. Receipts from
CONSTANT PRICESThe dollar figures in the Key interest royalties, dividends and the sale of fixed
Statistics table, including forecasts, are adjusted for tangible assets are excluded.
inflation using the current year (i.e. year published) as INDUSTRY VALUE ADDED (IVA)The market value of
the base year. This removes the impact of changes in goods and services produced by the industry minus the
the purchasing power of the dollar, leaving only the cost of goods and services used in production. IVA is
“real” growth or decline in industry metrics. The inflation also described as the industry’s contribution to GDP, or
adjustments in IBISWorld’s reports are made using the profit plus wages and depreciation.
US Bureau of Economic Analysis’ implicit GDP price INTERNATIONAL TRADEThe level of international
deflator. trade is determined by ratios of exports to revenue and
DOMESTIC DEMANDSpending on industry goods and imports to domestic demand. For exports/revenue: low is
services within the United States, regardless of their less than 5%, medium is 5% to 20%, and high is more
country of origin. It is derived by adding imports to than 20%. Imports/domestic demand: low is less than
industry revenue, and then subtracting exports. 5%, medium is 5% to 35%, and high is more than
EMPLOYMENTThe number of permanent, part-time, 35%.
temporary and seasonal employees, working proprietors, LIFE CYCLEAll industries go through periods of growth,
partners, managers and executives within the industry. maturity and decline. IBISWorld determines an
ENTERPRISE A division that is separately managed industry’s life cycle by considering its growth rate
and keeps management accounts. Each enterprise (measured by IVA) compared with GDP; the growth rate
consists of one or more establishments that are under of the number of establishments; the amount of change
common ownership or control. the industry’s products are undergoing; the rate of
technological change; and the level of customer
ESTABLISHMENTThe smallest type of accounting unit
acceptance of industry products and services.
within an enterprise, an establishment is a single
physical location where business is conducted or where NONEMPLOYING ESTABLISHMENT Businesses with
services or industrial operations are performed. Multiple no paid employment or payroll, also known as
establishments under common control make up an nonemployers. These are mostly set up by self-employed
enterprise. individuals.
EXPORTSTotal value of industry goods and services sold PROFITIBISWorld uses earnings before interest and tax
by US companies to customers abroad. (EBIT) as an indicator of a company’s profitability. It is
calculated as revenue minus expenses, excluding
IMPORTS Total value of industry goods and services
interest and tax.
brought in from foreign countries to be sold in the
United States.

Jargon & Glossary
IBISWorld Glossary VOLATILITYThe level of volatility is determined by WAGESThe gross total wages and salaries of all
averaging the absolute change in revenue in each of the employees in the industry. The cost of benefits is also
continued past five years. Volatility levels: very high is more than included in this figure.
±20%; high volatility is ±10% to ±20%; moderate
volatility is ±3% to ±10%; and low volatility is less than
±3%.

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WWW.IBISWORLD.

COM The Retail Market for Toys in the USOctober 2016 1

Game time: Increased spending and greater

IBISWorld Industry Report OD6117

2 About this Industry 15 International Trade 29 Revenue Volatility

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

About this Industry

Main Activities The primary activities of this industry are

The major products and services in this industry are

Similar Industries 42392 Toy & Craft Supplies Wholesaling in the US

45112 Hobby & Toy Stores in the US

45211 Department Stores in the US

45331 Used Goods Stores in the US

45411a E-Commerce & Online Auctions in the US

Additional Resources For additional information on this industry

Provided to: Wise Business Plans (212385509) | 17 April 2017

Key Statistics Revenue Annual Growth 11-16 Annual Growth 16-21

$1.4bn $3.1bn 57,948

Key External Drivers

Industry Structure Life Cycle Stage Mature Regulation Level Medium

Provided to: Wise Business Plans (212385509) | 17 April 2017

Provided to: Wise Business Plans (212385509) | 17 April 2017

Per capita disposable income Time spent on leisure and sports

4.5 hours per day per capita 5.40

Provided to: Wise Business Plans (212385509) | 17 April 2017

Current The Retail Market for Toys includes

More than half of total toy retail sales are

Provided to: Wise Business Plans (212385509) | 17 April 2017

Variable costs Employment and wage figures for The

Provided to: Wise Business Plans (212385509) | 17 April 2017

Industry IBISWorld expects the Retail Market for

E-commerce drives Online retailers are expected to

Provided to: Wise Business Plans (212385509) | 17 April 2017

Back to basics Although adults are an important

Provided to: Wise Business Plans (212385509) | 17 April 2017

20 Maturity Quality Growth

Key Features of a Mature Industry

The Retail Market for Toys

Toy & Craft Supplies Wholesaling

Toy, Doll & Game Manufacturing

Provided to: Wise Business Plans (212385509) | 17 April 2017

Provided to: Wise Business Plans (212385509) | 17 April 2017

Products & Markets

Supply Chain KEY BUYING INDUSTRIES

KEY SELLING INDUSTRIES

Products & Services Products and services segmentation (2016)

Total $30.5bn SOURCE: WWW.IBISWORLD.COM

Provided to: Wise Business Plans (212385509) | 17 April 2017

Products & Markets

Products & Services Traditional entertainment Traditional toys

Provided to: Wise Business Plans (212385509) | 17 April 2017

Products & Markets

Major Markets Major market segmentation (2016)

Consumers are the end buyers of toys Consumers aged 25 to 64

Provided to: Wise Business Plans (212385509) | 17 April 2017

Products & Markets

Provided to: Wise Business Plans (212385509) | 17 April 2017

Products & Markets

Business Locations 2016

Provided to: Wise Business Plans (212385509) | 17 April 2017

Products & Markets

Business Locations Similar to other retailing industries, toy

particularly attractive to retailers due to

COM The Retail Market for Toys in the USOctober 2016 1