Amanda Aldridge on retail: Traditional toy stores face a Christmas stuffing

The products might often be cuddly and remind you of a childhood when it was possible to play all day rather than sit in an office. But don't think the toy market is a happy place to be; as Christmas approaches it becomes one of the most cut-throat areas of retail.

It is increasingly hard for toy retailers to make a dime no matter which country they trade in. Earlier this year the famous FAO Schwarz toy chain closed all stores except its New York flagship, KB Toys filed for Chapter 11 asset protection and even the mighty Toys 'R' Us has been rumoured to be considering selling its core toy retailing operation.

Closer to home, it is hard to think of any significant specialist toy chains in the high street, aside from The Entertainer and Early Learning Centre, although there are still many one- and two-store independents, including, of course, Hamleys.

The specialists have been victims of the increasing commoditisation of toys, which has enabled more general retailers such as Argos, Woolworths and - yet again - the supermarkets to take an increasing market share.

Recent figures from Euromonitor show how the marketplace has changed in Europe. In 1998, speciality toyshops accounted for about 43% of sales of traditional toys and games, but this had fallen to nearly 39% by 2003.

In contrast, the supermarkets have increased their market share by 4%.

There are a few factors at play in the toy sector that make it hard to succeed in - especially for the small players. For starters, there is the tough task of predicting which toys will be the bestsellers.

Getting this wrong can be expensive. And when it comes to re-ordering a hot product, smaller players are likely to be pushed aside for much bigger orders from the likes of Argos.

What makes it even more difficult for specialists is that the season's hot toys will be largely determined by what the manufacturers choose to advertise. What's more, the toy manufacturers work closely with the bigger retailers on ad campaigns for their products, so you will often see a strapline that declares something like 'now available in Asda'.

The power of this marketing to children cannot be underestimated - whatever their age. My three-and-a-half-year-old, after previously watching the ad-free CBeebies and Playhouse Disney, has recently started watching Nick Junior, where there are commercials - and she's now a toy ad specialist.

She can reel them all off, knows what all the toys do and (surprise, surprise), where mummy can buy them.

Another blow to the traditional toy retailers is the increasing dominance of computer and video games, which have drastically reduced the appeal of many old-fashioned toys and games.

In the past few years I have noticed that boys grow out of established toys quickly (much more so than girls), and I don't know of any six-year-old boy without a Nintendo Game Boy, Microsoft Xbox or Sony PlayStation. For toy specialists it is unfortunate that most parents' hard-earned money is now being spent on products that relate closely to their offspring's high-tech world.

So Christmas is a double-edged sword for specialists. It is a crucial time, the period that will make or break them. If they get it right, it will make their year, but if they pick the wrong stock, the turkey won't be the only thing stuffed on December 25.

Amanda Aldridge is head of retail at KPMG

30 SECONDS ON... CHRISTMAS TOYS

- Bratz dolls are expected to be the most sought-after Christmas present this year, according to the Toy Retailers Association. Its main doll rival, Barbie, did not even feature in the top ten stocking-fillers.

- The Cabbage Patch Kids are set for a resurgence, 22 years after their original launch, thanks to a campaign running in the UK, US and Australia.

- Nostalgia figures highly in the toys forecast to be a hit this Christmas. Buckaroo, Cluedo and Twister are all expected to be snapped up by parents who remember playing them when they were children.

- There is some true innovation on the list, though. Robosapien is being marketed as the first 'affordable humanoid robot'. He comes with 67 pre-programmed functions, among them the ability to fart, belch and rap.

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