Macy’s New Toy Shops Could Be A Winning Play This Christmas

Macy’s, over the past year, has seen that adding Toys R Us merchandise to its website has attracted new customers. Now it is betting that adding Toys R Us shops to its department stores will draw additional in-person shoppers.

If Toys R Us and Macy’s do a good job of executing that plan, it could give Macy’s a major holiday boost, not just in toy sales, but by drawing parents and grandparents – who will make additional non-toy purchases – to the stores.

To do that, however, the new owners of Toys R Us will have to show they understand the hard holiday lessons the original Toys R Us executives learned before the retailer went bankrupt and liquidated all of its U.S. toy stores.

The new owner of the Toys R Us brand and Macy’s last year announced a partnership that added Toys R Us products to the macys.com website, and revealed plans to put Toys R Us shops inside Macy’s stores nationwide in 2022.

The partners last week said they have begun rolling out the toy shops in Macy’s stores. They plan to have a Toys R Us shop in every Macy’s store by Oct. 15.

The toy shops will range in size from 1,000 square feet to 10,000 square-foot flagship versions in 11 high-volume Macy’s stores. Those flagship locations will include Macy’s Herald Square store in New York, Lenox Square in Atlanta, Dadeland in Miami, and Ala Moana in Hawaii. The toy shops will be designed with the flexibility to add additional shelf space during the peak weeks of the holiday season.

WHP Global, a New York-based brand acquisition, investment, and management firm, acquired a controlling stake in the company that owned the rights to the Toys R Us brand in early 2021. Since then, WHP Global has been selling toys under the Toys R Us name on Macy’s website, and has opened a flagship physical store at the American Dream megamall in East Rutherford, N.J.

Yehuda Shmidman, the chairman and CEO of WHP Global, is a self-described “Toys R Us” kid who believes the iconic brand name has a future selling to new generations of kids and parents.

Macy’s and WHP are planning to host nine days of in-store events, with activities and toy giveaways, from Oct. 15 to 23, to celebrate the launch of the shops.

Since Macy’s began offering Toys R Us merchandise on its website, it has reported some encouraging numbers. In the 4th quarter of 2021, 25% of the customers that shopped Toys R Us merchandise were new to the Macy’s brand, and 93% of the Toys R Us online customers cross-shopped in other Macy’s categories, according to the fourth-quarter earnings presentation.

In the first quarter of 2022, 87% of Toys R Us customers cross-shopped other categories, Macy’s reported.

But in-store shops are a trickier merchandising and marketing challenge than online sales.

Here are the hard holiday lessons the original Toys R Us learned back when it competing with WalmartWMT
, TargetTGT
, and AmazonAMZN
for toy sales, and some of the challenges the Macy’s toy shops will face:

• It’s almost impossible to compete against Walmart, Target, and Amazon on price or assortment.
• Being out-of-stock on popular toys is a toy retailer’s worst nightmare before Christmas.
• In-store toy shoppers tend to be last-minute shoppers, meaning the stores have to be ready to do the bulk of their holiday sales in the hectic last week before Christmas.

Toys R Us executives were complaining, decades before the retailer filed for bankruptcy, that Walmart and Target were using toys as loss-leaders during the holidays to draw parents, who would also buy lots of other things when they came into the store looking for the best price on a Barbie Dreamhouse. Amazon increased price competition by making it easy to search online for toys.

And with limited space in the Macy’s stores, Toys R Us will only be able to offer a curated assortment of toys, meaning it will be crucial that it picks the right toys to put on the shelves.

One of the old Toys R Us’ key weapons in the holiday toy wars was that its size, and long history in the toy business, gave it the clout with manufacturers to insure that it got shipments of the hot toys the competition was sold out of. The new Toys R Us doesn’t have the same scale or status yet, so it will have to come up with the right mix of holiday bestsellers and perennial favorites it knows it can have in stock through the holiday season.

The strength of the shops will depend on their ability to draw parents, grandparents, and kids who want to browse a well-selected assortment of toys, rather than shop for a particular hot toy. The shops will need to be featured prominently in the Macy’s stores, and well-staffed and maintained.

WHP and Macy’s are also betting on some Toys R Us star power to draw people to the shops. The shops will have a life-size Geoffrey statue perched on a bench for photos and selfies.