Top 1000 toys and hobbies retailers collectively grew their online sales 21.5% in 2017—the fourth-fastest rate among the 15 product categories tracked by Internet Retailer.
The growth curve swells to 25.2% if you remove Toys R Us, the largest toy retailer ranked in the Internet Retailer 2018 Top 1000 at No. 38, which ceased selling online in March after filing for bankruptcy (the hedge funds that now own the Toys R Us brand in November launched pop-up sections in roughly 600 Kroger stores called Geoffrey’s Toy Box and they plan to relaunch the toy retailer as a standalone operation next year). Toys R Us sold $1.68 billion online last year, but only grew its online revenue 13.0%, far slower than the overall toys and hobbies category growth.
Regardless of whether Toys R Us is included, web sales gains for the 31 toys and hobbies merchants ranked in the Internet Retailer 2018 Top 1000 outpaced the broader U.S. e-commerce market, which grew 15.6% last year, as well as the overall Top 1000, which jumped 18.5% in 2017.
Two retailers dominate the toys/hobbies market
The two largest toy and hobby retailers, Toys R Us and GameStop, No. 40, had an outsized impact on the category, as the two merchants accounted for 56.2% of the category’s sales last year.
Toys R Us, in particular, has long been dragging the category’s overall growth rate down as it had an 8.3% five-year compound annual growth rate (CAGR) for its web sales. GameStop, on the other hand, has been steadily growing, with a 22.4% five-year e-commerce CAGR.
However, GameStop, which grew its online sales 17.0% last year, also dragged down the overall growth rate within the category. Excluding those giants, the 29 other retailers within the category grew their online sales 30.6% last year.
Smaller online retailers are growing quickly
In the shadow of those large merchants, smaller, more niche retailers are generating strong online growth. Seven toys and hobbies retailers grew their online sales more than 50% last year, including Provo Craft & Novelty Inc., No. 189, which operates Cricut.com.
Cricut, which grew 112.5% last year, sells a variety of crafting tools on its own site, and it also offers a monthly subscription that allows consumers to access templates and digital images they can use with their Cricut cutting machine. The retailer has been generating strong growth for some time; its five-year e-commerce CAGR is 108.3%.
Cricut generated the fastest growth last year within the category. The next-fastest online growth was generated by KultofAthena.com, No. 793, and Hasbro.com, No. 795, which grew 88.4% and and 88.1%, respectively. The two have taken very different paths. Kult of Athena is a niche retailer that sells swords and weapons while Hasbro.com is the e-commerce site for the largest toy maker in the world in terms of stock market value, and third largest in terms of revenues.
Mass merchants grow their market share
A large share of toys and hobbies online sales take place on Amazon’s website and app. In fact, Amazon accounted for one in every six dollars spent on toys in the U.S. last year, according to online retail analytics firm Edge Market Share (formerly One Click Retail). And it has been aggressively looking to fill the void left by Toys R Us. In addition, it is taking a page from the Toys R Us playbook by publishing a holiday toy catalog similar to the Toys R Us Big Book. Amazon mailed that catalog to millions of U.S. households and handed it out at Whole Foods Market locations.
Amazon already accounts for an outsized share of online sales for major toy brands, such as Hasbro Inc., Lego and Mattel Inc., according to data gathered by data analytics firm Jumpshot.
Amazon is far from alone in seeking to boost its share of the toy market. Walmart, for instance, has bought up more inventory and enlarged the store space it is allocating to toys.
“There’s a lot of the toy volume up for grabs,” said Steve Bratspies, Walmart’s chief merchandising officer over the summer at Walmart’s Shareholders Meeting in Arkansas.
Meanwhile, Party City, No. 283, has been operating 50 pop-up toy stores since September 2018. The stores feature a range of toys from top brands such as Hasbro and Mattel The retailer also plans to add more toys to its website as part of a push into the category. And, if the pop-up pilot goes well, the company will likely expand the format next year.
“There have been years and years of a standalone toy store that is now gone,” said Ryan Vero, Party City’s president of retail. “Customers are going to be looking for something to fill that void, and we intend to do that.”