Wal-Mart and the toy department

June 23, 2009

There is understandable concern in the toy industry over Wal-Mart’s intentions regarding its toy departments. There are plans to cut down on the height of shelving in all departments and rumors about a reallocation of space to other products. The former, cutting down on shelf height, will probably affect inventory levels more than sku’s while the latter would of course affect sku counts. 


A front page article in the June 20, 2009 New York Times, “Big Retailers Shift Strategy in a Recession,” makes mention of Wal-Mart’s overall plans as well as those of other retailers when it says: “Many chains, including Wal-Mart, will carry less inventory and fewer brands.”


My advice to any company that is thinking about cutting back space in its toy department is to be very cautious about doing so. Why, because cutting back on the size of a toy department has historically marked the beginning of a downward slide for retailers. I am going to explain why I say this but first I want to tell you a story that has stayed in my memory.


A number of years ago, I spoke with man whose family had run a successful, small neighborhood grocery store when he was a kid. The store had a prominent candy counter right up front which was very popular with the neighborhood children. His parents, however, noticed that the kids with their small change purchases were making it harder for bigger spending adult customers to get to the register. As a result, they decided to take the candy department out.


Their sales plummeted. Why, because it was the kids, with their love of candy, that chose where their parents shopped. Needless-to-say, his parents quickly reinstalled the candy counter and business recovered.


It is with this in mind that I point out that a toy represents far more than a commodity to families and the toy department is much more than an extra department. In fact, the toy department is what makes shopping a fun, family event rather than a sober, solitary function.


It’s not hard to find examples of what happens when a retailers forgets the importance of the toy department to families. Department stores, remember them, took out their toy departments some years ago and moved from family destinations to places where women largely shopped. We all know how well that that worked out.


Pre-Kmart Sears used to have big toy departments as well. Back in the 1980’s, they took them out because someone decided that they didn’t create big enough dollars per register ring. Sears subsequently moved from being a major family destination to the place for male shoppers to buy tools. Things have not gone too well for Sears since then.


Will Wal-Mart fall if it reduces the size of its toy department? Well, certainly not any time soon. But, I would be willing to bet that any major move in the direction of reducing the importance of the toy department will have long term consequences for this multi-billion pound guerilla.