Toy Retailers

Industry Insight

Date February 2020


Current Trends

  • The U.S. toy industry struggled in 2019, still impacted by the closing of Toys “R” Us; sales are expected to pick up and normalize in 2020 and 2021
  • Amazon, Walmart, and Target continue to battle for market share post-Toys “R” Us
  • New trends are shaping the industry, including tech toys and the popularity of YouTube unboxing videos
  • Retail toy industry revenue is expected to remain stable but flat, reaching $34.9 billion in 2024


approximate net recovery on cost

By the Numbers - Y/Y Consumer price index


Industry still struggling as competition grows: Following the closure of industry giant Toys “R” Us in 2018, sales for the toy industry continued to struggle in 2019. From January to June 2019, the U.S. toy industry experienced a $734 million drop in retail sales to reach $7.4 billion, a decline of 9.0 percent. However, this decline portrayed a distorted view of the overall industry, as the sales numbers were compared to 2018 when sales were freshly impacted by the Toys “R” Us liquidation. In the three weeks ending July 2019, the industry earned a 9 percent increase in sales, no longer affected by Toys “R” Us comparisons. Still, total retail toy sales for 2019 were down 4.0 percent at $20.9 billion. Sales also declined in the fourth quarter of 2019, due in part to a shorter shopping season between Thanksgiving and Christmas, according to NPD Group. However, toy sales are starting to normalize and are expected to pick up in 2020 through the end of 2021.

Leading toy retailers Amazon, Walmart, and Target, continue to battle for market share. According to IBISWorld, Walmart holds the largest share at 23.1 percent, followed by Amazon at 19.6 percent. All three retailers increased their toy assortments and ramped up their marketing in 2019. Walmart, which coined itself “America’s Best Toy Shop,” introduced a digital playground and relaunched its interactive toy lab, while Amazon released its second annual paper toy catalog for holiday 2019. In October, Walmart also rolled back prices on more than 200 toys in stores and online ahead of the holiday season.

Amazon continues to have great sucess in the toy market. Retail Dive reported that Amazon controlled almost 75 percent of all Hasbro and Mattel online transactions prior to the downfall of Toys “R” Us. In October 2019, Amazon listed more than 600 exclusive toys online in preparation for the holiday season. The company experienced a stunning fourth quarter, reporting a year-over-year net sales increase of 21 percent to $87.4 billion for 2019, compared with $72.4 billion in 2018. Investor Place reported that Amazon “management mentioned that the Thanksgiving to Cyber Monday sales-fest especially benefited toys.” Adding, “Amazon will continuously disrupt this market” as the youngest millennials reach their mid-twenties in 2021 and begin having children.

In 2019, Target partnered with Disney to open 25 shop-in-shops for Disney-branded toys, and in October 2019 it partnered with TRU Kids Brands, which owns the intellectual property of Toys “R” Us. Through the partnership, Target became the online retail venue for anyone shopping on Together with retail concept, b8ta, TRU Kids also opened two Toys “R” Us stores in Houston and New Jersey for the 2019 holiday season. Disney’s partner, Hasbro, experienced a 40 percent increase in partner-brand sales in the third quarter of 2019, made possible by popular Disney movies Avengers: Endgame, Frozen 2, and Star Wars: The Rise of Skywalker. Still, Target’s fourth quarter sales were unimpressive, dropping 1.4 percent for the holiday period compared to 2018. Toy sales were flat, with most of its success stemming from e-commerce sales. Online toy sales grew around 12 percent year-over-year in the fourth quarter, despite a small drop in online market share for Black Friday.

Changing influences and trends: As children become accustomed to changing their toy preferences more frequently, toy and game manufacturers are introducing new products on a regular basis, focusing on innovation, technological advancements, and digital products over traditional toys. Some of the top electronic toys for 2019 included tablets, drones, robots, Amazon Echo dots, smartwatches, virtual reality products, and interactive pets. In addition, parents are opting for stimulating and educational toys with a focus on “STEAM” skills, which include science, technology, engineering, art, and math. In 2019, a 3D toy printer hit the market, allowing children to print thousands of different toys and models from a catalogue, as well as create their own designs. Yet, action figures and accessories achieved the strongest performance of any toy category through August 2019, according to NPD Group. The growth was driven in part by the popularity of Toy Story and Fortnite, as well as the Beyblade brand.

YouTube-based influencers continue to drive toys sales with their “unboxing” videos. According to Forbes, YouTube’s 10 highest earners brought in a total of $162 million between June 2018 and June 2019, with its top kid media stars garnering millions of followers and billions of views. One-fifth of the platform’s top 100 channels with the most subscribers are about toys. Ryan’s World, Dude Perfect, and Guava Juice are among the toy brands founded by YouTubers and promoted on the website. These products are driving children and teens into stores to purchase tie-in items, including games, crafts, figures, vehicles, slime, and plush toys. The YouTube marketing world will continue to be a major catalyst for toy sales, as approximately 95 percent of teens have access to a smartphone. In addition, about 81 percent of parents with children ages 11 or younger let their kids watch YouTube, according to Pew Research Center.

Inclusivity and diversity in race, gender, and sexual orientation were large influences in 2019. Toy suppliers and retailers that create products promoting diversity are able to broaden their customer base and boost sales. In September 2019, Mattel announced the launch of a gender-inclusive doll line, inviting “all kids to play,” exhibiting a shift toward inclusion. As gender fluidity becomes more commonplace and encouraged, marketing is tailored towards kids expressing themselves freely in toy decision-making and play.

Demand is highly seasonal: The toy industry relies heavily on holiday sales, up to 50 percent of which typically occur in the fourth quarter. For toy retailers, annual inventory levels and operational decisions must be managed accordingly.

With a significant percentage of total annual revenue generated in the months of November and December, clients lending on toy inventory should understand the impact of seasonal values on their collateral. Seasonality coupled with the obsolescence risk related to often fickle consumer purchasing trends in individual categories are primary drivers of gross recovery values for toys. Inventory mix drives changes in gross recovery as higher-recovering categories, such as licensed action figures, games, and bicycles, must be managed in conjunction with lower-recovering categories including plush and seasonal toys.

Miscalculations in purchasing, supply chain shortages in popular items, or vendor fulfillment issues can quickly derail a retailer’s holiday season sales momentum, resulting in stock-to-sales ratio imbalances by category that can impact sales capacity for months. In turn, normal-course overstock and sales capacity issues may severely impact appraisal sell-throughs by category and overall sales capacity, ultimately taking a toll on already highly seasonal Net Orderly Liquidation Values.

Note: This publication is provided for informational marketing purposes only. The material contained herein should not be regarded as advice, nor relied upon to make financial, operational or other decisions; nor should it be used as a substitute for an asset appraisal. Actual recovery values may vary from transaction to transaction and the recovery values referenced herein are for representative transactions without regard to specific key factors. This material may be redistributed only in its entirety, including notice of copyright. All rights reserved. ©2020 Gordon Brothers, LLC.

Reference sources: amazon, investor place, forbes, The NPD Group, insider-trends, vox, the motley fool, nbc news, retail dive, creditntell, statista, first research, ibisworld, u.S. bureau of labor statistics