Toys R Us Closures: Exclusive Coresight Research Survey Suggests Big Gains for Walmart and Target

Transcription

1 Toys R Us Closures: Exclusive Coresight Research Survey Suggests Big Gains for and Deborah Weinswig CEO and Founder Coresight Research deborahweinswig@fung1937.com US: HK: CN: Toys R Us looks set to close all 800 of its US stores, following its bankruptcy filing. To assess which other toy retailers are likely to gain from the chain s closure, we conducted a proprietary consumer survey among US toy shoppers. 1) Toys R Us is in fourth place in the US toy retail market, as measured by number of shoppers. 2) The chain s closure will leave three US retail giants, and fighting it out for dominance of the toy retail market. 3) Even though they are already among the top three toy retailers, and look set to punch above their weight in terms of gaining share from closed Toys R Us stores, as Toys R Us shoppers already browse and buy from them more often than average toy shoppers do. 4) In addition, s toy shopper numbers are dominated by Prime members. The site sees low numbers of toy shoppers who do not have a Prime membership. This suggests that may struggle to pick up large numbers of Toys R Us shoppers who do not have Prime memberships. 5) Our survey data suggest that dollar stores, department stores, ebay and Costco could also benefit from Toys R Us closures. 1

2 Our consumer research suggests that and are set to enjoy disproportionate gains from the closure of Toys R Us stores in the US. In terms of other retailers that Toys R Us shoppers also browsed or bought from,, and were virtually tied, suggesting that all three will gain toy dollars that previously went to Toys R Us. Introduction: $7 Billion Up for Grabs as Toys R Us Closes Its Doors Whether or not killed Toys R Us, the e-commerce giant is likely to be one of the retailers that gains from the chain s closure as toy shoppers look for alternatives. However, will see very strong competition for those toy dollars, according to findings from our exclusive consumer survey, which we conducted in the wake of the Toys R Us bankruptcy. Our research suggests that and are set to enjoy disproportionate gains from the closure of Toys R Us stores in the US and that s dependence on Prime members may limit its ability to acquire former Toys R Us customers. Toys R Us generated more than $7 billion in sales in the US in the year ended January 2017 (latest reported), which means rivals stand to reap major gains once the retailer closes its doors. To find out where those shopper dollars might go, we surveyed US consumers about where they browse and buy children s toys and games. Our research enables us to look at those who shopped at Toys R Us in the past year and determine which other retailers they also browsed and/or bought children s toys and games from. This gives us an indication of which retailers are most likely to win the toy dollars that Toys R Us will no longer be taking. In this report, we also offer a full rundown of where US consumers browse and buy toys and games and assess how Prime membership factors into s toy shopper numbers. Other Retailers that Toys R Us Shoppers Also Browsed and Bought Toys and Games from in the Past Year Toys R Us is (or was) the fourth-most-popular toy retailer in the US, as measured by number of shoppers. Its closure leaves three giants fighting over the lion s share of the market:, and. In our survey, we asked Toys R Us shoppers at which additional retailers they had browsed for toys and games in the past year. As we chart below, the results showed that and were neck and neck, with just behind suggesting that all three will capture a substantial share of purchases that previously went to Toys R Us. Consolidation among the top tier of retailers is not necessarily the only result we will see from these store closures, however. Lower-ranking retailers are likely to see gains, too, as toy dollars flow down as well as up. The data suggest that dollar stores, department stores, ebay and Costco could also chalk up gains as a result of the Toys R Us closures. 2

3 Figure 1. US Consumer Survey: Where Toys R Us Shoppers Have Also Browsed for Children s Toys and Games in the Past 12 Months (%) Dollar Stores* Department Stores ebay Costco Disney Store Five Below Kmart Sam s Club Independent Toy Other Retailers 29.8% 23.2% 21.6% 18.6% 16.5% 15.3% 14.0% 13.7% 13.7% 12.7% 65.4% 65.4% 63.6% Base: 393 US Internet users ages 18+ who have bought children s toys or games from Toys R Us in the past 12 months, surveyed March 15 21, 2018 *Defined in the survey as Dollar General/Dollar Tree/Family Dollar/99 Cents Only While will almost certainly grow its toy sales on the back of the Toys R Us closures, and look set enjoy disproportionate gains. We compared the list of additional retailers at which Toys R Us shoppers also browsed with the retailers where all toy and game shoppers browsed and found that: Toys R Us shoppers were much more likely than average toy shoppers to have browsed for toys at or. Toys R Us shoppers were much more likely than average toy shoppers to have browsed toys at or. Likelihood to have browsed at or was higher by double digits among Toys R Us shoppers than among all shoppers who browsed for toys. Among all toy shoppers, was the most popular retailer for browsing toys. However, among Toys R Us shoppers, was tied with in first place. The relative strength of and was probably due to the fact that many Toys R Us shoppers, by definition, had a preference for shopping at multichannel retailers instead of Internet pure plays such as. 3

4 Figure 2. US Consumer Survey: Top Five Retailers (Besides Toys R Us) Where Toys R Us Shoppers and All Toy Browsers Have Browsed for Children s Toys and Games in the Past 12 Months (%) Toys R US Shoppers All Toys Browsers Dollar Stores Department Stores 29.8% 25.3% 23.2% 18.7% 65.4% 63.8% 65.4% 54.7% 10.7 Percentage-Point Gap 63.6% 50.4% 13.2 Percentage-Point Gap Base: 1,181 US Internet users ages 18+ who have browsed children s toys or games in the past 12 months and 393 US Internet users ages 18+ who have bought children s toys or games from Toys R Us in the past 12 months, surveyed March 15 21, 2018 Toys R Us shoppers were considerably more likely than all toy shoppers to have bought toys from or in the past year. Similarly, we see a large gap when we compare where Toys R Us shoppers and all toy shoppers bought toys in the past 12 months. Toys R Us shoppers were considerably more likely than all toy shoppers to have bought toys from or in the past year. Figure 3. US Consumer Survey: Top Five Retailers (Besides Toys R Us) Where Toys R Us Shoppers and All Toy Shoppers Have Bought Children s Toys and Games in the Past 12 Months (%) Dollar Stores Costco Toys R Us Shoppers 24.9% 21.4% 16.0% 12.3% All Toy Shoppers 49.9% 53.7% 51.9% 45.5% 6.4 Percentage-Point Gap 46.8% 38.6% 8.2 Percentage-Point Gap Base: 1,092 US Internet users ages 18+ who have bought children s toys or games in the past 12 months and 393 US Internet users ages 18+ who have bought children s toys or games from Toys R Us in the past 12 months, surveyed March 15 21,

5 is America s number one toy retailer, as measured by number of browsers/buyers. Ranking America s Toy Retailers:, and Dominate Our research confirms that the closure of Toys R Us will leave, and as the major retailers in the toys and games category. Below, we chart the overall rankings of retailers in terms of numbers of shoppers browsing and buying children s toys and games. The graph excludes Toys R Us, which placed fourth in the rankings, with 36% of all toy shoppers having bought from the chain in the past 12 months. Figure 4. US Consumer Survey: Where Toy Shoppers Have Browsed and Bought Children s Toys and Games in the Past 12 Months (%) Browsed Bought Dollar Stores Department Stores ebay Costco Independent Toy Shops Disney Store Five Below Kmart Sam s Club Other Retailers 25.3% 21.4% 18.7% 12.0% 16.1% 8.0% 15.3% 12.3% 11.4% 10.4% 11.2% 7.9% 10.8% 8.8% 9.9% 6.9% 8.9% 5.0% 16.8% 20.0% 53.7% 54.7% 45.5% 50.4% 38.6% 63.8% Graph excludes Toys R Us. Figures are respective percentages of all those who have browsed and all those who have bought from each retailer/type of retailer shown. Base: 1,181 US Internet users ages 18+ who have browsed for children s toys or games in the past 12 months and 1,092 US Internet users ages 18+ who have bought children s toys or games in the past 12 months s leading position in toys is almost entirely attributable to Prime members. s Leadership in Toys Is Driven by Prime Members may be in first place by total number of toy and game shoppers, but its appeal is not universal, and its leading position in toys is almost entirely attributable to Prime members: 5

6 Almost three-quarters of Prime members surveyed who bought toys or games in the past year did so on. Among those who bought toys in the past year but did not have a Prime membership, less than one-quarter bought on. That places firmly behind, and Toys R Us among toy shoppers who are not Prime members. Toys R Us sees relatively even representation among shoppers with Prime membership and those without. is well placed to benefit as Prime members who had been shopping at Toys R Us turn to for toys instead. However, s low shopper numbers among those without Prime suggest that it may face challenges in picking up large numbers of non-prime Toys R Us shoppers. Figure 5. US Consumer Survey: Top Three Retailers Where Toy Shoppers Have Bought Children s Toys and Games in the Past 12 Months, by Prime Membership (%) Toy Shoppers Who Are Prime Members Toy Shoppers Who Are Not Prime Members 23.8% 73.5% 41.4% 50.4% 30.8% 42.9% Toys R Us 34.2% 36.0% Prime Members personally have a Prime membership; Not Prime Members have no access to Prime benefits, including through a membership of someone else in their household. Base: 1,092 US Internet users ages 18+ who have bought children s toys or games in the past 12 months, including 476 with Prime membership. Among all survey respondents, 41% had a personal Prime membership and a further 22% had access to Prime through someone else in their household. The remaining 36% of respondents had no access to Prime (figures do not sum to 100 due to rounding). Toys R Us shoppers recorded Prime membership rates that were broadly similar to the average. The closure of all stores by fourth-place Toys R Us will leave, and fighting it out for dominance of the US toy retail market. Key Takeaways The closure of all stores by fourth-place toy retailer Toys R Us will leave, and fighting it out for dominance of the US toy retail market. All three are likely to pick up some of the $7 billion in spending that would otherwise have gone to Toys R Us. Even though they are already in the top three, and look set to punch above their weight in terms of gaining shoppers 6

7 from the Toys R Us store closures, as they overindex for browsing and buying among Toys R Us shoppers relative to all toy shoppers. Moreover, Prime members account for a large proportion of those who shop for toys on. The site sees low toy shopper participation among those without Prime, which suggests that may struggle to pick up large numbers of Toys R Us shoppers who are not Prime members. Our survey data suggest that dollar stores, department stores, ebay and Costco could also benefit from the Toys R Us closures. 7

8 Deborah Weinswig, CPA CEO and Founder Coresight Research New York: Hong Kong: China: John Mercer Senior Analyst Hong Kong: 2nd Floor, Hong Kong Spinners Industrial Building Phase 1&2 800 Cheung Sha Wan Road, Kowloon Hong Kong London: Marylebone Road London, NW1 6JQ United Kingdom New York: 1359 Broadway, 18th Floor New York, NY Coresight.com 8