I’ve spent a few years in the toy trade, so you would think by now I would be able to spot things coming a mile off. Yet this week has seen some twists that I just didn’t foresee on any level. For instance, I had only been discussing at a client meeting the previous day how I thought it was likely that Toys R Us would strike a deal to take over retail space within an established retailer in the UK, rather than building a store estate of its own from scratch. We even kicked some ideas around about which retailers might be suitable for such a partnership. But did we include WHSmith in that list? No, of course not.
That announcement really came out of left field yesterday. I gather that the initial trial will see concessions open in nine stores for 12 months, starting in the first half of next year, with a view to extending the deal across the store estate for a period of up to ten years if it is successful. I guess we’ll find out in due course whether the deal is a stroke of genius on both parts. For sure, WHSmith needs to do something to attract more customers: it has felt like a store struggling to find its lane for many years now, and in toy terms, it hasn’t been perceived as a major player for a very long time. So, a tie-up with Toys R Us makes sense on a number of levels. But is there a match in terms of customer profile, and how will the arrangement work in terms of in-store space and merchandising? Are WHSmith stores really big enough – with enough spare shelf space – to do justice to the Toys R Us toy offering? There are lots of questions and this is very much one to keep an eye on. You can read more here.
Away from the toy market, I had a whole raft of gags lined up about the increasingly ridiculous political events of the week, but it doesn’t feel right to be making light of what is developing into a genuinely concerning situation. Yes, the revolving doors at 10 & 11 Downing Street may be spinning more often than the one used by Watford managers, but I am not sure it’s a laughing matter anymore. Take the preposterous personalities out of the equation and you are left with the harsh reality of taxes rising even further, the promise of a two-year energy cap truncated to six months, public spending cuts and the potential return of austerity – just weeks after UK consumers were promised more money in their pockets. Who saw that coming? Actually, quite a few expert economists, but unfortunately it seems we don’t listen to experts anymore.
What we are left with is not a pretty sight: already fragile consumer confidence dented even further, just as we enter the crucial festive sales period. And an even greater worry over what will happen in the New Year when the energy subsidy ends. Even before we get to that point, there is the threat of a rise in VAT to help fill the financial black hole. We will find out on Halloween (of all days) if the Chancellor has chosen that particular strategy, although I am sure retailers will be hoping the government elects to go down a different path. If, as has been suggested, VAT rises from 20% to 22.5%, it will not only give retailers an administrative headache of epic proportions at their busiest time of the year, but it will also completely mess up price points. A £29.99 line is not going to rise comfortably to £30.75, but how many retailers will want to swallow the 2.5% rise, especially in the current climate. What an unholy mess.
There was one thing I did see coming: that the second Amazon Prime Day would end up as a bit of a damp squib. It’s good to see that I have not lost my powers of prediction completely. I just didn’t get the impression that sellers or vendors approached it with great enthusiasm, with sale ‘bargains’ feeling like they were just merchandise which had been deliberately over-priced to begin with, in order to allow for subsequent reductions. Compare Amazon’s selection with the latest Sainsbury’s Argos sale items, for instance – chalk and cheese. There was precious little social media buzz, and in the end, it felt like the whole event was just aimed at flogging a few more Alexas.
To be fair, it doesn’t feel like Amazon has been having a phenomenal time on toys all year. Many toy companies have told me that the numbers are way down on previous years, even as dealing with Amazon becomes ever more complicated (and costly). Q4 is when online sales traditionally pick up pace versus physical stores. However, if many Christmas purchases do end up being made very late this year – as has been widely predicted – it is more likely to benefit bricks and mortar retailers than online sellers, as consumers are traditionally reluctant to trust the delivery network in the final week or two.
Unsurprisingly therefore, Amazon is aiming to get sales moving sooner rather than later. Following Prime Day, it released its list of top 10 toys for Christmas yesterday – a solid enough selection, with some very nice lines, while at the same time appearing to omit some of this year’s big hitter toys and brands. Of course, this could be a sign that the team feels it will get sales on those items anyway, without needing the extra push – or is it that Amazon doesn’t have them in stock? Previously, it was natural to assume that Amazon would have a very broad – maybe the broadest – selection of toys available: this year, that isn’t necessarily the case.
And keep an eye on the Irish market, where Amazon recently opened a giant new fulfilment centre in Baldonnell, which is the size of seven football pitches. The company apparently won’t comment on whether it plans to launch an Amazon.ie service anytime soon, but one has to assume that they didn’t build a facility like that so the Irish football team could train there ahead of the World Cup.
Realistically, the Amazon bubble is a very long way from bursting, and it remains a pivotal account which toy suppliers need to have a clear strategy to get the best out of. However, I get the sense that things are changing in terms of its relationship with the toy community, and its aspiration to dominate the toy space here in the UK may have been derailed, or at very least held up – which, in the long term, may be no bad thing for everyone.
