San Diego

Shifts in Toy Market Create Opportunity for Local Businesses

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Geppetto's Toy Store

Christmas may come a little early this year for Geppetto’s, San Diego’s largest specialty toy retailer.

Hit hard by the liquidation of retailer Toys ‘R’ Us, toy-maker Mattel plans to cut 2,200 jobs as part of the cost savings plan it detailed in October. The company said Friday the closure of its biggest customer dented its gross sales by 10 percent in the second quarter.

But Toys ‘R’ Us and Mattel’s misfortune might be a local small business’ opportunity in San Diego.

Brian Miller, owner of the nation’s largest regional toy chain, Geppetto’s, said his company has already started increasing marketing and investing to capture a piece of the market left on the table with recent shifts in the toy market.

“That demand is going to have to go somewhere,” Miller said.

Six months after filing for bankruptcy, the large retail chain Toys ‘R’ Us is selling or closing all 800 of its U.S. stores, affecting as many as 33,000 jobs. The company is winding down its operations completely after six decades.

Miller said capturing even a small percentage of Toys ‘R’ Us business could be a boom for his business.

“Even a small percentage of Toys ‘R’ Us customers, if they come to Geppetto’s, we’re a small business, and that could be a really nice chunk of business for us,” Miller said. “Even if just a few percentage points of Toys ‘R’ Us shoppers come to Geppetos that’s a big number for us.”

Toys ‘R’ Us has struggled to pay down nearly $8 billion in debt — much of it dating to a 2005 leveraged buyout. There were reports earlier this week that Toys R Us had stopped paying its suppliers, which include the country’s largest toymakers, including Mattel.

Shares of Mattel plummeted more than 8 percent this week, after the company disclosed that it would be cutting 2,200 jobs on Wednesday.

Miller said the impact of Mattel won't affect his business as much as the larger retailers like Toys 'R' Us.

"So, if half of our store was Mattel and Barbie, yea, I would be really worried. But it’s not," Miller said. "It’s a smattering of many different manufactures from Lego to Mattel to smaller companies that are more specialized. So, all of our eggs are not in one basket."

Miller said he didn't believe shifts in spending habits and consumer preferences had too much to do with the changes in the marketplace for toys or parents buying more expensive electronic gifts for their kids.

"I don’t necessarily think ‘Oh my Gosh,’ they’re not buying all of the CandyLand games, just because they’re getting an Xbox, I think they’re doing both,” he said.

Mattel's net sales fell 13.7 percent to $840.7 million in the second quarter ending June 30, short of the $851.8 million analysts had expected.

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