Toy sellers ramp up shoppers' experience ahead of holidays

NEW YORK (AP) — Is Party City the successor to Toys R Us? Will shoppers embrace the revival of FAO Schwarz, staffed with theatrical performers?

Ahead of the holiday season, stores aren't just expanding their toy aisles to offer more choices. They're trying to at the very least replicate the Toys R Us experience that let shoppers discover toys as the way to take sales they don't want to see go to Amazon. That means creating play areas for kids to play with big dollhouses, offering demos of new playthings and staging events like scavenger hunts in the stores.

Earlier this month, Party City opened 50 Toy City pop-up shops that feature six-by-8-foot Lego dinosaurs and other interactive displays The shops are adjacent to its Halloween temporary shops and have a shared entry. When Halloween is over, more space will be expanded to Toy City, which feature top toy brands and holiday's top toys from Spin Master to Mattel.

"We really wanted to create some theater, some drama," said Ryan Vero, the company's president of retail operations at Party City. "Shopping for toys should be fun."

FAO Schwarz, the iconic toy store is set to reopen in November in Manhattan after it was shuttered three years ago. The store will be staffed with theatrical performers from demonstrators to magicians to toy soldiers. It's part of an overall strategy to launch the brand on a global scale, says David Conn, CEO of ThreeSixty Group Inc., which acquired the brand from Toys R Us in 2016. The store will bring back the piano that customers can dance on and that was made famous in the Tom Hanks movie "Big." But it also will have new areas like a mini grocery store where kids can buy make believe food made of wood. In another section, there'll be a mechanic who will help kids build radio controlled race cars. Some of that experience, like magic shows, will be replicated at Nordstrom, Macy's and Belk's, among others, which will have temporary FAO Schwarz shops this holiday season.

In the discount world, Walmart will have 30 percent more new toys in select stores around the country and will offer 40 percent more toys on Walmart.com from a year ago ahead of the holidays. And for the November and December months, it will have new branded shops called America's Best Toy Shop. Meanwhile, starting in late October, Target will add extra space at 500 stores that are near former Toys R Us stores to devote to bigger toys like electric cars, playhouses and musical instruments. At those stores, it's adding nearly 200 products. In addition, 100 Target stores will see new layouts and fixtures in the toy area as part of its overall revamping of its overall store network. Target is also adding more kids' events at the stores than last year. Most recently it had a Lego Minecraft event that featured a scavenger hunt.

"It's all about the demonstrations, the hands-on experience. When you get your hands on a toy and you can touch and feel, it does lead to greater sales," said Jim Silver, editor-in-chief of TTPM, a toy review site. "And those are the experiences that shoppers enjoy." Silver believes that Target will benefit the most from Toys R Us's demise, since it has the biggest customer overlap, followed by Amazon, Walmart, and then independent stores.

Toy sellers had been long taking advantage of Toys R Us woes, but it stepped up its efforts when the chain filed Chapter 11 in the fall of 2017 and accelerated the pace even more when the chain announced it was liquidating its operations in March. That left $7 billion in sales up for grabs. As of early this year, Toys R Us had more than 800 U.S. stores. It closed the last 200 stores at the end of June.

With reports of Toys R Us's demise, there was an outpouring of nostalgia from shoppers, and some analysts credit that empathy for helping to drive an uptick in toy sales for the first half of the year. U.S. toy sales from January through June increased 7 percent to $7.9 billion, according to NPD Group Inc., a market research firm. Last year, toy sales increased 1 percent to $20.7 billion from 2016.

"I am convinced that the strong toy industry growth so far this year has been at least partially supported by the empathy that people felt towards losing a store like Toys R Us, " said Juli Lennett, NPD's senior vice president and industry adviser for toys in a statement. "I think it brought about an emotional response that resulted in parents buying more toys overall."

But toy sellers aren't relying on nostalgia to get shoppers back in the stores for the holidays, but rather new brands and experiences.

At least one foreign toy retailer is studying the U.S. market more carefully after Toys R Us's demise.

Mexico-based Distroller World is an experience-based retailer with more than 60 stores in Mexico and Latin America that include shops in department stores. It's set to open its third store in the U.S. in October, with a store at the Glendale Galleria mall in Los Angeles in October. And it will be approaching U.S. department stores to open shops to replicate its model in Mexico, says Daryn Fillis, CEO.

At the center of the experience: parents and children create their own adventure to adopt their own alien baby delivered in a space capsule. Fillis said that both U.S. stores have done well.

Distroller World made its U.S. debut in 2017 with a store in Fashion Valley in San Diego, California.

Back in 2015, Distroller World met with Toys R Us to open two shops, but Fillis decided against it amid reports of its financial struggles.

"The online shopping component is part of the reason why Toys R Us is gone," he said. "I am a firm believer that the local mom and pop shops will have an incredible opportunity."

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