Tuesday, September 16, 2003

The toy oligopoly meets the retail oligopsony A review from the Atlanta Business Chronicle of a 1998 book called Toys Wars sums it up: "The toy business -- which once consisted of scores of manufacturers, hundreds of wholesalers and tens of thousands of 'mom-and-pop' toy stores -- has compressed itself down into a thin layer of giant producers and a small cadre of superstores, led by Toys 'R Us and Wal-Mart, which together account for almost two-thirds of all the toys sold in America." The approximately $20 billion toy and game industry is hardly child's play. Two dominating competitors lead it. Mattel (Barbie, Hot Wheels, Fisher-Price) with $4.9 billion in sales in 1990, Hasbro *G.I. Joe, Zoids, Play-Doh, Transformers, Milton Bradley, Parker Brothers) at $2.8 billion Several other large companies like Ty Inc. (Beanie Babies), Lego, Applause (stuffed toys) and Jakks Pacific (action figures) add up to about $2 billion more. That's a significant chunk of the business, though not a tight oligopoly. Mattel and Hasbro keep expanding. In recent years Hasbro acquired Tiger Electronics, Avalon Hill, and Galoob. Mattel has bought The Learning Company and PrintPaks. In a telling incident, Mattel attempted, but failed, to acquire Hasbro in 1996. (We don't include the even tighter video games, a $10 billion industry where Sony and Nintendo are dominant.). All of these companies, however powerful, run into an oligopsony of even more determined retailers. A considerable majority of toy sales go through five chains. Wal-Mart leads the group, with K Mart, Target, Toys 'R Us, and KB Toys. In fact, the two toy specialists have been faltering as the retail chains, especially Wal-Mart, gobble up a larger share of toy sales. The toy companies have had a rocky time. Demand for toys and games has leveled off, but the worst problem is that they encounter  the Wal-Mart juggernaut, Once again, an oligopoly faces oligopsony, and only the strongest survive. 6:41:39 PM

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