Toys R Us’ downfall will wreak havoc on the small toy companies

Toys R Us' downfall will wreak havoc on the small toy companies
Image credit: Flickr (CC) / Mack Male

The news about Toys R Us going away will continue to ring around in the toy industry for a while. The closing down of Toys R Us will impact the small toy companies the most. Some of them already feel the hit, USA Today reports.

One of those companies is Fantasma, the paper adds. It was going to get a huge chance as its Nuclear Neon Slime was chosen to be in the checkout line of all Toys R Us stores in the US for a while.

“That chance ended as quick as it started”, Roger Dreyer, owner of Fantasma says to USA Today. While most people link Toys R Us with big toy giants like Hasbro and Mattel, it’s really the small toy companies which will take the brunt.

Yes, Mattel and Hasbro did get a big chunk of their sales through Toys R Us. But they are also among the biggest debt holders for the store chain. This means they haven’t gotten all of the money they’ve earned from sales in Toys R Us stores. Yet, they are still in good shape.

Looking for new opportunities

Meanwhile, for the small toy makers, it’s also not about the money. They rely on Toys R us for brand exposure. Get your toys on the Toys R Us shelves and you could potentially have a big seller which can put your company on the map.

Toys R Us also put special effort to promote smaller brands. “They were the one bastion where you could show the full line of your products at bricks and mortar, and it’s going to be a shame to see them go,” says Neil Friedman, CEO of Alex Brands, a toy company based in Fairfield, NJ.

Of course, other retailer do that, too. But Toys R Us is/was by far the biggest and many small toy companies actually rely on it for their sales.

Other big store chains which sell toys, like Walmart, Target and online – Amazon, are more likely to focus on top-selling stuff, rather than take a chance on new, less popular products, says Ray Wimer, a retail professor at Syracuse University.

Toys R us also sold many items from the companies. While other chains focused on two to three of the most popular items of a given smaller brand, Toys R Us featured seven or more, says Fantasma.

Now the smaller toy companies are starting to look at independent toy stores. “The problem with the independents is that they are very demanding,” Dreyer says, “and are sometimes slow to pay the bills. So it will take a lot of these independent stores to make up for an 800-store chain.’’

He also adds that some of the big retailers are also looking forward to capitalize on Toys R Us’ demise. They want to add more brands and more stuff in order to attract more customers. So, there’s hope for the smaller toy companies, but it will still be much more difficult for them now.