Wal-Mart has quietly become a defining force in the shrinking toy industry - driving major retailers to the wall with cut-throat pricing and aggressive promotion. In recent years, the No. 1 retailer has managed to corner 20% of the market.
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"Wal-Mart uses toys as a loss-leader, a way to bring adults in and sell them something else," said Bret Jordan, toy industry analyst at stock research firm Advest. "As Wal-Mart becomes a big chunk of the toy distribution channel, and it's willing to sell a $17 Barbie for $14, it becomes hard to keep premium pricing across the board."
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As a result, even as parents snap up armies of Bratz dolls and Hokey Pokey Elmos as holiday gifts this year, the $23 billion toy industry is having trouble passing go.
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FAO, parent of FAO Schwarz and Zany Brainy, is casting about for enough money to get it through the holiday season and avoid another bankruptcy filing.
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Toys "R" Us reported an unexpected quarterly loss of $38 million and said it's closing all Kids "R" Us and Imaginarium stores, including five in the city.
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Experts said several forces are at play in the increasingly difficult toy industry, but the largest is the Wal-Mart factor. If Wal-Mart is selling toys at below-cost, it forces smaller toy retailers to ask for cheaper wholesale prices, stop selling certain toys altogether or go out of business - an outcome that gives Wal-Mart even more power, experts said.
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"If you're a toy manufacturer, it's better to have Wal-Mart [as a customer] than not have it. But even as you love 'em, you hate 'em. Wal-Mart is always tough on suppliers," said Dennis McAlpine, entertainment analyst at McAlpine Associates in Scarsdale.
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After Wal-Mart, Toys "R" Us is the nation's second biggest toy retailer and Target is third. Together, the top three control about half of toy sales and price aggressively.
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Beyond pricing pressure from discounters, the toy industry also is suffering from lack of a must-have blockbuster toy. Big years in the past had items such as Furby and Cabbage Patch dolls to ignite a frenzy but there's no major hit this year.
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Legos, meanwhile, is struggling because its once-hot licenses for Star Wars and Harry Potter have cooled with no related movies released this year.
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Read the full story here
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"Wal-Mart uses toys as a loss-leader, a way to bring adults in and sell them something else," said Bret Jordan, toy industry analyst at stock research firm Advest. "As Wal-Mart becomes a big chunk of the toy distribution channel, and it's willing to sell a $17 Barbie for $14, it becomes hard to keep premium pricing across the board."
«
As a result, even as parents snap up armies of Bratz dolls and Hokey Pokey Elmos as holiday gifts this year, the $23 billion toy industry is having trouble passing go.
«
FAO, parent of FAO Schwarz and Zany Brainy, is casting about for enough money to get it through the holiday season and avoid another bankruptcy filing.
«
Toys "R" Us reported an unexpected quarterly loss of $38 million and said it's closing all Kids "R" Us and Imaginarium stores, including five in the city.
«
Experts said several forces are at play in the increasingly difficult toy industry, but the largest is the Wal-Mart factor. If Wal-Mart is selling toys at below-cost, it forces smaller toy retailers to ask for cheaper wholesale prices, stop selling certain toys altogether or go out of business - an outcome that gives Wal-Mart even more power, experts said.
«
"If you're a toy manufacturer, it's better to have Wal-Mart [as a customer] than not have it. But even as you love 'em, you hate 'em. Wal-Mart is always tough on suppliers," said Dennis McAlpine, entertainment analyst at McAlpine Associates in Scarsdale.
«
After Wal-Mart, Toys "R" Us is the nation's second biggest toy retailer and Target is third. Together, the top three control about half of toy sales and price aggressively.
«
Beyond pricing pressure from discounters, the toy industry also is suffering from lack of a must-have blockbuster toy. Big years in the past had items such as Furby and Cabbage Patch dolls to ignite a frenzy but there's no major hit this year.
«
Legos, meanwhile, is struggling because its once-hot licenses for Star Wars and Harry Potter have cooled with no related movies released this year.
«
Read the full story here