Smyths Toys poured salt on Toys R Us’ wounds this week by snapping up 93 of its former rival’s stores in Germany, Austria and Switzerland.
Amid the growing threat of online and a squeeze in non-food spending, the Irish toy retailer has prevailed while Toys R Us floundered.
Smyths, founded by four brothers – Tony, Tommie, Padraig and Liam – in 1986, keeps its Republic of Ireland figures under wraps, because of the company’s unlimited status. In the UK, however, it reported sales of £396.5m in 2016 – up 19% year on year. Pre-tax profits climbed 69% to £10m.
Meanwhile, Toys R Us UK, which was loss-making for most of the last decade, buckled under the weight of its debt.
Some analysts cited Smyths as the main cause of its competitor’s collapse – they think it caused more significant damage than online players, which bagged nearly 40% of the toy sector’s sales last year.
And now, with the shutters down on all Toys R Us stores, Smyths has room to spread its wings. Its imminent push into mainland Europe will nearly double its store portfolio, which at present consists of 110 stores across Ireland the UK.
But, given the challenges facing all bricks-and-mortar toy firms, how is it that Smyths has thrived?
What does Smyths have that Toys R Us did not?
From the outside, and the snaps of its Friern Barnet store above, Smyths does not appear too dissimilar from its former competitor. Its large stores in retail park locations carry a large range, with aisle after aisle of toys piled high.
However, it won customers (and market share – it held 9.5% in 2017, the same as Amazon and versus 12% for Argos and 8% for Toys R Us ) in a number of ways.
“The Fisher-Price Teach ’n Tag Movi was £34.99 in Smyths and £49.99 in Toys R Us”
First, Smyths is extremely competitive on price.
For example, a GlobalData price comparison last September found that the Fisher-Price Teach ’n Tag Movi was £34.99 in Smyths and £49.99 in Toys R Us.
“If the price is cheaper in Smyths and it’s on the same retail park, why would a consumer choose to shop at Toys R Us?” asks GlobalData analyst Fiona Paton.
But even Smyths can’t beat Amazon on price – the online giant beat Smyths on five out of seven popular toys last year.
“While Smyths is slightly more protected from Amazon than Toys R Us was, it is still vulnerable and needs to make sure that stores are really exciting and engaging for children to convince families to visit for the experience instead of just purchasing online,” Paton says.
Paton also believes that the in-store experience and customer service are better at Smyths, dubbing Toys R Us as “notoriously poor” on these fronts.
Smyths aims to have an interactive store environment and frequently runs events around new product launches.
When it opens new branches it typically offers candy floss, face painting and attractions such as a live DJ providing entertainment to children.
However, the experience at Smyths is arguably not equal to that of high street toy chain The Entertainer, which is renowned for its traditional toy shop feel. The Entertainer is also well located for targeting pocket money spend.
But, as one retail watcher points out, Smyths has a more “comprehensive range” because The Entertainer does not stock some popular lines.
Watch: The Entertainer unboxes new-concept toy store
Marketing and digital
Smyths takes an aggressive approach to marketing, running big TV adverts at Christmas and engaging heavily in local leafleting.
It is also proactive on social media. Its YouTube channel has an impressive following of more than 286,000.
“Much like its stores, Toys R Us’ website wasn’t great. It was quite dated in comparison in terms of product displays and descriptions”
GlobalData analyst Fiona Paton
What’s more, Smyths was more advanced online than Toys R Us.
Paton says: “Much like its stores, Toys R Us’ website wasn’t great. It was quite dated in comparison in terms of product displays and descriptions. Also, Toys R Us didn’t update items often enough, so many things that were out of stock would show.”
And while Toys R Us did offer click-and-collect in 29 minutes and free delivery on items over £29.99, it did not offer next-day options. By comparison, Smyths offers next-day delivery, free delivery on items over £25 and click-and-collect within an hour.
Clearly Toys R Us had its own issues, which stemmed from its US parent and a failure to evolve.
That, paired with Smyths’ superior experience, price and fulfilment options, left shoppers with little choice but to switch allegiances, accelerating the demise of the once-cherished, all-American toy chain.
If its success continues, Smyths’ new European markets may be the first of many.