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Toy trade set for massive growth in next five years

Research analyst, GlobalData, has forecast the British toy industry will be worth £4.6bn within five years – a growth of 16.2% – with online sales accounting for more than 43% of the market.

The internet will be by far the biggest driver of growth in this market, pushing more than 84% of the overall growth. The same period is likely to see Amazon overtake Argos to become the UK’s biggest toy retailer by 2020. More than 51% of toys and games consumers chose Amazon in 2017, accelerating the difficulties faced by specialist toy retail chains including Toys R Us and Hamleys.

Toys R Us in the US has and Canada has filed for bankruptcy protection and previously engaged investment bank Lazard to tackle its $5bn debt, of which $400m is due for repayment in 2018. Toys R Us in Europe was restructured in 2015 as falling profits descended into losses as etailers and supermarkets grabbed increasing market share.

The toy retailer has 1,600 stores worldwide employing more than 60,000 staff, and has said that its operations outside the US and Canada would not fall under the Chapter 11 bankruptcy protection proceedings.

By contrast “Amazon has managed to improve shopper loyalty with its Amazon Prime services and impressive range of toys and games,” said Molly Johnson-Jones, senior retail analyst at GlobalData Retail. Prices on this year’s must-have toys are lower than its competitors, its range is unrivalled and the convenience of its offering is market-leading.”

The research also found that electronic toys and traditional toys will be two of the strongest categories over the next few years, with electronic toys growing to take 13.1 per cent of the total toy market by 2022, as arts and crafts, constructions toy and board games will represent 30.5 per cent. Sales of traditional toys will rise by 15.6% over the next five years, with Smyths expected to accumulate 2.7% of that growth.

“The UK has always been a highly playground trend driven market, but this year has seen unusually high levels of innovation in toys under £10”, Johnson-Jones continued saying. Now that children are driving a portion of sales growth in the toy market, it is more important than ever for bricks and mortar retailers to create engaging and immersive environments for young toy shoppers.”

She suggests that by focusing on ‘pocket money toys’ such as LOL Surprise Dolls and Hatchimal CollEggtibles that are popular with younger children, traditional toy stores can still win customers.

“The UK has always been a highly playground-trend-driven market, but this year has seen unusually high levels of innovation in toys under £10. Now that children are driving a portion of sales growth in the toy market, it is more important than ever for bricks-and-mortar retailers to create an engaging and immersive environment for young toy shoppers.”

Independent toy chain, The Entertainer, has seen a healthy 6% rise in sales during the first half of this year driven by growth in its own-label products and bricks-and-mortar expansion. The retailer opened six new stores so far this year and has a further nine planned for 2017. The toys specialist also benefited from playground crazes such as Finger Spinners and Fidget Cubes and has plans to develop the ecommerce side of its business.

Founder and managing director Gary Grant said: “We’re delighted with this year’s performance so far, particularly having had to face into increased promotional pressure in the category and exchange rate fluctuations. We have managed to hold firm to our plans and with a number of key movie and range releases still to come, we expect a positive effect on both our sales and margin for the remainder of the year.”