By Gary Symons
TLL Editor in Chief
Retail giant Macy’s says it will expand its partnership with Toys ‘R’ Us to include all of the 500+ stores in the United States.
The company previously announced the program would be rolled out into an initial 400 stores.
The expansion is scheduled for completion by Oct. 15, in time for the holiday season.
The deal is also a major success for Toys ‘R’ Us, which struggled in the past to compete against large box stores like Walmart and Target. The store-in-store installations will range from relatively small 1,000 square foot areas, up to large toy stores within Macy’s up to 10,000 square feet for some of Macy’s flagship stores, like the ones in New York, LA or Chicago.
Macy’s CEO Jeff Gennette said in a recent conference call that the expansion was ordered after positive results with the Toys R Us partnership to date. He predicted toys will become a billion dollar business for Macy’s.
“We’re encouraged by the customer response in the current store locations, and we’re seeing an improved sales trend in our kids’ business, which typically sits next to Toys ‘R’ Us store within store,” Gennette said. “Toys is a huge opportunity for us with a fair share market opportunity of $1 billion in annual sales.”
According to data from the retail research group NPD, US toy sales hit $38.2 billion in revenues for 2021.
The deal with Toys ‘R’ Us is part of a wider trend in retail licensing that has seen major retailers creating smaller, in-store boutiques with other retail brands.
Kohl’s and Target have also been experimenting with store-in-store installations. Last week Kohl’s announced it would launch Sephora beauty sites in more than 1,100 stores, which is 300 more locations than it originally planned.
The big box store chain Target has similarly been opening Ulta Beauty in-store shops in parts of its network of stores across the US.
These types of deals have so far been a win-win for both sides. Even as the Toys ‘R’ Us deal ramps up revenue for Macy’s, Kohl’s management has predicted that the Sephora boutiques will reach an impressive $2 billion in sales by 2025.
For department stores, the smaller boutique brands also creates pathways for new customers. For example, Gennette told investors and reporters that the stores are enjoying a halo effect, in which toy shoppers are also increasing sales for merchandise in other departments. Macy’s has reported 87% of customers buying products in the Toys ‘R’ Us section also bought products in other categories. In particular, Macy’s has seen a significant boost in sales of children’s apparel.
“We’re encouraged by the customer response in the current [Toys ‘R’ Us] store locations,” Gennette said. “And we’re seeing an improved sales trend in our kids’ business, which typically sits next to Toys ‘R’ Us store-within-stores.”