Rebuilding Momentum

With 2009’s lessons learned, toy retailers ready for this year’s challenges

By Pamela Brill -- Gifts and Dec, February 1, 2010

As toy stores set their sights on the latest offerings at this month’s Toy Fair, Playthings asked them to reveal what they had learned in the past year, what they’ll do differently in 2010 and what they’re looking for from manufacturers going forward.

Was 2009 a good year for your store? What are your expectations for your business in 2010?

“Overall, our sales were down about 12 percent for 2009. December, however, was very strong: up about 10 percent. People are hopefully cautious for 2010. We have a strong community dedicated to supporting local business. Only time will tell if that commitment is strong enough to overcome the economic drive to the discount stores. I am developing my 2010 business plan for a flat economy.”

—Laura Miller, Imagination Village, Concord, N.H.

“2009 was a very encouraging year. Many of our stores saw double-digit growth over 2008. I predict that when the economy really gains steam, demand will come back with a vengeance. I’m particularly optimistic about the latter half of 2010, and I anticipate another year of double-digit growth.”

—Brent Taylor, Brilliant Sky Toys & Books, Lansing, Mich.

“Actually, it was not [a good year]. Three of my four stores were down for the year. Only one was up — single digits. But, 2009 required us all to see things differently. Fourth quarter business was excellent. November and December were double-digit increases over last year. What with the cost reductions we implemented at the very start of the year, profitability increased on declining to flat revenues. I call that a 'good year.’ Expectations for 2010 are cautious to moderately optimistic. Consumers are learning to save more. Savings is the inverse of spending, so all areas of consumer activity are going to be affected by the new way consumers think. They can learn to do without. However, we should see significantly fewer jitters in the first half of 2010 than we did in 2009. People know what their income stream will be, what their house is worth and, finally, that their portfolios have recovered.”

—Michael Ziegenhagen, Playmatters Toy Stores, Pepper Pike, Ohio

“2009 was invigorating—one of the most challenging of my 35 years in this business. I went into the year hitting the reset button, re-evaluating every adjustable expense from supplies to advertising to payroll, and tweaking prices where possible. I ended the year with a pared-down inventory, great cash flow, a personal paycheck and a healthy profit, proving that less can be more. My expectations this year are a continuation of my predictions of last year; as retailers, we need to accept that the reckless, spend-free economy of the past is a bygone. I am an independent specialty retailer, and I truly believe the secret is not giving away the ship, but navigating it with more finesse.”

—Nancy Stanek, Toys et Cetera, Chicago

“2009 was a good year for our Kmart toy department. We hope to continue building on the progress we made this year for a strong 2010.”

—Julia Fitzgerald, Sears Holding Co., Hoffman Estates, Ill.

“2009 was a challenging year. We found our business to be down 30 percent overall, with December only down 5 percent from last year. We are hoping that is an indication things might improve for us this year. With hopes for a better 2010, we are continuing to be careful with our dollars, so that we may be able to handle anything that occurs this year.”

—Lin Hanzelko, Timmy’s Toy Chest, Lake Mary, Fla.

“2009 was a rollercoaster year for business. Between our four stores we were down 12 percent. One of our stores was closed for two months while we did a build out on a new location. We also opted not to do a catalog in 2009. When we factor both those into the equation, we were down 3 to 5 percent.”

—Mike Sicad, Toy Tyme, St. Louis

“We opened a new store in ’09 with much optimism, but knowing it was a very risky time to expand. While our two current stores had reasonable sales, it was not a year of growth for them. All our growth came from our new location, and we were very excited to see this store take off.”

—Sallie Kashiwa, Timbuk Toys, Denver

“2009 certainly posed some challenges, but it was a great year for learning and trying new things. We expect 2010 to be another tough year, but that doesn’t mean it can’t be a good year.”

—Sheri Gurock, Magic Beans, Boston

“2009 was not our best year. 2008 was a more profitable year for us. Although we saw more foot traffic in our store, our customers were spending less. We also saw a decrease in school purchase orders due to cuts in local school budgets. In 2010, we are expecting to increase sales by offering more incentives to come into our store and shop locally.”

—Kelly Pluchino, Education Station, Montgomery, N.Y.

“Yes, 2009 was a good year, mostly due to significant changes in our business. We have good expectations for 2010 and should hopefully be stronger than 2009 as the economy slowly recovers.”

—Jamie Burdette, LB Toys, Media, Penn.

“Our gross profits were down a bit from last year, but the last two months were showing signs of life. Our holiday sales were almost identical to last year’s, which was pretty good. I think 2010 will be a little better for us, but I’m not expecting anything drastic. In fact, I think we’re several years away from seeing the kind of sales we saw in 2006.”

—David Plenn, The Dinosaur Farm, South Pasadena, Calif.

“2009 was a good year considering the economic conditions affecting my customers and affecting the availability of capital to small businesses. Our year looks like we finished approximately 5 to 7 percent above 2008 (2008 was our best of all time). Our traffic flow was up, but the average transaction was down. Our total expense costs were down approximately 13 percent. Our top line growth increased slightly, but our bottom line had a healthier increase. Our expectations for next year are for a slight increase in sales of approximately 7 to 10 percent, but our expense costs will increase by about 5 percent.”

—Fred Rosenberg, Toys & Candy on the Park, Kingwood, Texas

“2009 was a mixed bag. It was a slow start, but a strong finish! The first three quarters were down but the holiday season made up the difference and we pulled out a slightly better year. I feel that 2010 might be the reverse, with a little better year-over-year in the first half and a flat fourth quarter.”

—Bob Breneman, G.Willikers! Toy Shop, Portsmouth, N.H.

“2009 saw a great year of growth for our toy category; in fact, it was our best yet. We continued to add to our wide selection of toys and games, focusing specifically on promoting educational toys from brands like Learning Resources and Thames & Kosmos. The result was a very strong fourth quarter with over 150 percent revenue growth year-over-year. In 2010 we expect continued growth and plan to aggressively add to our selection in bikes and other existing segments, while focusing on some of our newer specialty categories like R/C and musical instruments. Other categories that saw substantial growth in ’09 from January through mid-December were trampolines and bouncers (over 200 percent), playhouses and play tents (96 percent) and building sets (over 100 percent).”

—Brent Mathews, CSN Stores, Boston

“We planned for a 10 percent decrease in 2009 because of the turn in the economy and decreasing interest in Webkinz, but were very pleased that we ended our year slightly up. (Is flat the new “up?”) We plan to open 15 to 18 new stores in 2010, so we expect another year of positive growth for comp store sales and overall sales.”

—Sharon DiMinico, Learning Express, Devens, Mass.

What factors are most impacting your store’s business and what are you doing to overcome them?

“The economy has had the largest impact, of course. In addition to the general downturn in the economy, we have seen a change in the way people are structuring their purchases. They are trying to be more conservative to save money, but also to reduce consumption and be “greener.” The target for birthday party presents, for example, that used to be $20 might now be $15. We are seriously looking at price points and broadening the range of products we carry for a retail price under $20. We continue to focus our marketing emphasis on quality toys with superior play value and the exceptional customer service experience of a small specialty store.”

—Laura Miller, Imagination Village, Concord, N.H.

“It’s a bit cliché to cite the economy, but that is certainly No. 1. We’ve worked hard to give people more reasons to visit our stores, and to increase things like our average ticket and our conversion rate with better selling and better service. Customer satisfaction doesn’t count anymore; the focus is now on customer delight.”

—Brent Taylor, Brilliant Sky Toys & Books, Lansing, Mich.

“The factors that impact our business are the increasing availability of the lines we carry on the Internet—often at prices that we are unable to meet. The consumer finds Internet shopping to be extremely convenient and, additionally, has little awareness of the impact Internet shopping has on the vitality of their communities. Also, the broadened distribution of specialty lines in the mass market omens for their demise in specialty. Finally, there are no run-away best-seller toys or toy lines that create a huge revenue stream for independent retailers.”

—Michael Ziegenhagen, Playmatters Toy Stores, Pepper Pike, Ohio

“Customer traffic remains down, so we face the sales challenge of servicing better the customers who open our door each day. We have renewed our commitment to offering our customers expert advice, personalized service, hassle-free returns and, of course, reinforcing our indelible best service: complimentary gift wrap. We also discovered this past season that offering our sales associates sales incentives was a far more effective means of increasing sales per customer than offering these incentives directly to customers with promotional prices and marked-down goods.”

—Nancy Stanek, Toys et Cetera, Chicago

“The economy was a big factor again in 2009. We focused on helping moms find ways to afford Christmas with programs such as layaway and our Christmas Club.”

—Julia Fitzgerald, Sears Holding Co., Hoffman Estates, Ill.

“Biggest factor we currently face is getting our average ticket up. Tickets for 2009 were just off a little compared to 2008, but the average dollar spent per ticket was down. To help overcome this, we are offering more specials to our customers, trying to entice them to spend more.”

—Mike Sicad, Toy Tyme, St. Louis

“Keeping costs under control is always important, but right now while the economy is rebuilding I don’t want to risk wasting a single dollar anywhere in the business. I am remaining very conservative in purchasing, holding tight to my open-to-buy budget. For payroll, we keep tight tabs on hours but also make sure we meet employees’ needs so our work force stays strong. Customer service is the most important factor in staying healthy, so it’s critical to have wonderful employees who are happy in their jobs.”

—Sallie Kashiwa, Timbuk Toys, Denver

“Obviously the economic climate is difficult. Many people are out of work, and everyone is trying to spend their money wisely. Customers are looking for good value, but I think more than ever people can really understand and appreciate the impact of shopping local. When you’re looking for a job, it really hits home that spending money locally creates more jobs. It’s such an important cycle. Another trend that’s hurting us is parents opting out of birthday presents for their kids. We got a lot of party invitations this past year that said 'no gifts please.’ This is partly driven by the economy, but it’s also because so many mass-market toys have such limited play value. Parents see their kids tear open a package and play with a toy for five minutes before it breaks or the child loses interest and it ends up at the bottom of a bin in the playroom gathering dust. They assume that all toys are destined for the same fate, and they don’t want to deal with it. But birthday gifts are a wonderful way to refresh a child’s toys and books as he or she grows older. And we know that great toys will stand the test of time. There are other factors aside from the economy, though. Kids are growing up faster. Electronics are getting so much more sophisticated; there are iPhone apps targeted at my toddler. It’s getting harder for toys to compete for kids’ attention, even though the benefits of play are so clearly documented.”

—Sheri Gurock, Magic Beans, Boston

“Economy is the biggest factor. People have less to spend and they are very budget-conscious. We offered many more coupons, specials and deals than we have ever done before to entice shoppers. We were also very careful in monitoring our stock levels so that we didn’t have excess stock and excess bills.”

—Lin Hanzelko, Timmy’s Toy Chest, Lake Mary, Fla.

“The most significant factor was expenses, most of which we were able to eliminate by closing our brick and mortar business and strictly focusing all efforts on online sales.”

—Jamie Burdette, LB Toys, Media, Penn.

“Wholesale costs are rising, for one thing. It kills sales when we have to charge $34.95 for something we charged $29.95 for last year. We’re searching out better products that can retail at lower price points. Also, we need to bring more bodies into the store, so we’ll be doing more promotions this year.”

—David Plenn, The Dinosaur Farm, South Pasadena, Calif.

“Consumer fear and the ability to obtain capital. Our staff works harder to exceed our customers’ expectations, we are working harder to find creative ways to increase our customer base and we work harder to have a better inventory mix to increase turns and customer excitement about our store.”

—Fred Rosenberg, Toys & Candy on the Park, Kingwood, Texas

“Generating customer interest is now and always has been a creative challenge. We’re partnering with other local businesses to give us increased exposure and getting more promotional with coupons and other incentives.”

—Bob Breneman, G.Willikers! Toy Shop, Portsmouth, N.H.

“Certainly the economy has shoppers watching their dollars more closely. In response, we’re selecting toys and games that are competitively priced and (as always) we’re stocking products that are made to last and have extended play value so families get the most for their money. Customers can 'test play’ every toy and game in our store to ensure they’re making the right choice before they invest in a product.”

—Tom England, Dancing Bear Toys and Gifts, Frederick, Md.

“For us—an online dealer—we’ve determined that a customer is always looking for a quality toy product at a great price that can be backed by a high level of service; in essence they’re looking for a convenient, hassle-free shopping experience. So, the initial challenge is to constantly strive for that balance. Also, as e-commerce continues to grow at a staggering rate, new online retailers are popping up every day and the transparency of the Internet allows a customer to shop for a product at 20+ retailers with the click of a mouse. A challenge for most online retailers is to keep customers coming back when the options are endless. We feel that our commitment to selection, price and service has allowed us to remain at the forefront of the industry and motivate our customers to keep shopping with ToysAndGamesOnline.com and CSN Stores.”

—Brent Mathews, CSN Stores, Boston

“The economy and high unemployment numbers are contributing to sales declines in certain regions of the country. There is not a lot we can do about that. Searching out hot products to replace the Webkinz mania of 2007 and 2008 will certainly be challenging, but that’s what we’ll be focusing on at Toy Fair. Sales will always fluctuate based on the number of hot products each year.”

—Sharon DiMinico, Learning Express, Devens, Mass.

“Conservative spending habits, cuts in school budgets, increase in minimums and freight costs, as well as carton minimums, are all impacting our business. To overcome these factors, we are having more sales with spending incentives (e.g. spend $50, get a $10 gift certificate to our store), submitting special orders less frequently in order to have fewer but larger quantity orders and ordering more from a wholesale distributor rather than individual companies.”

—Kelly Pluchino, Education Station, Montgomery, N.Y.

What would you like to see toy manufacturers do better?

“More US-made product in greener packaging.”

—Laura Miller, Imagination Village, Concord, N.H.

“In one word: terms. It is critically important in today’s business environment that retailers and manufacturers create partnerships that keep merchandise on the shelves. It is no secret that the manufacturers who offer the best terms are the same ones who are the top sellers each month in our stores. The easier they make it for us to stay in-stock, the more of their products we sell. It’s that simple, and everybody wins.”

—Brent Taylor, Brilliant Sky Toys & Books, Lansing, Mich.

“We would like to see continued investment in innovation. We also hope that in tough times, they continue to support their brands.”

—Julia Fitzgerald, Sears Holding Co., Hoffman Estates, Ill.

“Provide service. It is so difficult to believe that smaller vendors never follow up with a phone call or a mailer after Toy Fair or the ASTRA convention. Even if an initial order is placed, it is rare to receive a call for sell-through information or a reorder. Very few companies communicate effectively with their specialty retail clients.”

—Michael Ziegenhagen, Playmatters Toy Stores, Pepper Pike, Ohio

“For starters, I wish they’d support their product by sending out more in-store samples, having play days with a company rep and providing good JPEGs for products that we can feature in a newsletter or online site.”

—David Plenn, The Dinosaur Farm, South Pasadena, Calif.

“Providing my business personalized service commensurate with the service I provide my own customers. I think it is time for our manufacturers to understand that we are their customers. Stop force-feeding us programs we find hard to digest! Provide us with the support we need, i.e. stop making it about you and make it more about us.”

—Nancy Stanek, Toys et Cetera, Chicago

“Continue to offer retailers specials on freight and dating to help us with our stock levels. Continue to offer specialty toy stores products that are unique to us that help us maintain our difference from the big-box stores.”

—Lin Hanzelko, Timmy’s Toy Chest, Lake Mary, Fla.

“CPSIA requirements are driving prices up. I think vendors are coping bravely with this, but I wish legislation would support a more reasonable testing process so prices could come down. It breaks my heart that so many excellent, safe products have been eliminated from the market because small manufacturers have been driven out by the cost of testing.”

—Sallie Kashiwa, Timbuk Toys, Denver

“Be more innovative. In 2009, manufacturers played it safe and instead of really thinking outside the box and taking risks with new ideas, they stuck with the tried and true. I also think that the key to diverting kids away from the screen is to go back to basics. My 7-year-old thinks Etch-a-Sketch is pure magic. We also saw a lot of issues with manufacturers not keeping items in stock during 2009. I really hope that won’t repeat itself. We can’t sell what we don’t have.”

—Sheri Gurock, Magic Beans, Boston

“I would like to see more toys being manufactured in the U.S. to eliminate any worries parents may have about a toy manufactured outside of the country. (Yes, they are still concerned after all this time.) More toys should be manufactured using more natural materials—parents are always asking if I have organic stuff—and focus more on the quality of the product and not on the elaborate packaging. Toys break way too easily these days.”

—Kelly Pluchino, Education Station, Montgomery, N.Y.

“In order to follow through on our high level of service, operational excellence remains one of CSN Stores’ highest commitments and we expect the same from our suppliers. A lot of consumers shop online due to the 'convenience factor’—you hit 'purchase’ and the item appears at your doorstep—so we and our suppliers understand the importance of shipping items quickly and without dilemma. If we cease to be efficient, we cease being convenient. Getting items out the door and to customers as fast as possible is a team effort.”

—Brent Mathews, CSN Stores, Boston

“Improve the quality of their products; we see a fair amount of defects and/or poor packaging.”

—Jamie Burdette, LB Toys, Media, Penn.

“Specialty stores succeed when we offer wide selections of unique products not offered in the mass. So, if manufacturers made it simpler to purchase a broader selection from their lines, retailers could and would try a wider range of their product, not just the hot ones. For example, reduce case quantities from 6 to 3 each or 12 to 6 each. This helps in cash flow for the retailer—not having to buy too much overstock—and gives the retailer the ability to offer a wider selection to the customer.”

—Fred Rosenberg, Toys & Candy on the Park, Kingwood, Texas

“In judging the latest 2010 catalogs we’ve already received, I see some wonderfully creative products coming out this year. I think that better fulfillment rates and more communication from manufacturers as to up-to-date availability of products would help with my decision making.”

—Bob Breneman, G.Willikers! Toy Shop, Portsmouth, N.H.

“Minimum advertising pricing policies that are consistently enforced, less packaging, more battery-free and gender-neutral products that encourage open-ended creative play.”

—Tom England, Dancing Bear Toys and Gifts, Frederick, Md.

“Not run out of inventory in the fourth quarter.”

—Sharon DiMinico, Learning Express, Devens, Mass.

What’s the most important thing you learned as a retailer this past year?

“Staying calm and solid planning—and we’ll ride out the storm. Treat your customers well and they will think of you first.”

—Laura Miller, Imagination Village, Concord, N.H.

“To be patient. So many things have impacted our industry adversely in the last few years—recalls, the economy, the CPSIA—but we have to be careful not to panic and abandon what we know makes sense as retailers. Our industry (and consumers) will adapt, but it doesn’t happen overnight.”

—Brent Taylor, Brilliant Sky Toys & Books, Lansing, Mich.

“To have a distinctive 'point of view’ as a specialty toy retailer and to communicate it boldly and consistently to my customers and to my entire community. ”

—Michael Ziegenhagen, Playmatters Toy Stores, Pepper Pike, Ohio

“Discipline, determination and detail—that is what retail is all about. In the end, it’s about the bottom line: not gross sales, but net profit.”

—Nancy Stanek, Toys et Cetera, Chicago

“We learned that even in the toughest of times, moms want to give their children the toy or toys on their wish list. She is not looking for just any $10 toy; she is looking for a way to afford the toy her kid wants and toys that will last. The more often we are able to help her, the better. ”

—Julia Fitzgerald, Sears Holding Co., Hoffman Estates, Ill.

“Retail is a methodical process and the better one organizes, the better equipped the sales staff will be to meet customers’ requests and expectations. This is not a new understanding, but it was gratifying to see it play out this year as we opened a new store. So many things just fell into place thanks to good organizational processes.”

—Sallie Kashiwa, Timbuk Toys, Denver

“Adaptation. Buying less but stocking really good products that are selling. Finding new, inexpensive ways to bring in new customers.”

—Lin Hanzelko, Timmy’s Toy Chest, Lake Mary, Fla.

“2009 will go down in history as the year everyone discovered social media. It was the year we broke 1,000 fans on Facebook and over 2,000 followers on Twitter. It’s been really interesting to see what can be accomplished when you have a truly targeted audience who is interested in hearing what you have to say.”

—Sheri Gurock, Magic Beans, Boston

“Most important thing I learned in 2009 was not to worry about gross profit percentage, but to turn inventory into cash.”

—Mike Sicad, Toy Tyme, St. Louis

“This year, the most important thing I learned is better sales techniques and the importance of making sure all my employees know how to sell items in the store. Spending a few minutes with each customer almost always guarantees a larger sale.”

—Kelly Pluchino, Education Station, Montgomery, N.Y.

“Be creative. Listen to your customers. And don’t expect much from your banker.”

—Fred Rosenberg, Toys & Candy on the Park, Kingwood, Texas

“Stay focused and don’t overreact.”

—Bob Breneman, G.Willikers! Toy Shop, Portsmouth, N.H.

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