The Revolutionary Impact of Toys R Us on Mexican Retail in 2023. More Than Just Toys

In late October, the renowned U.S. toy and clothing chain, Toys R Us, splashed by opening a new branch in Galerias Insurgentes, Mexico City. This launch signals a significant milestone for Mexico's toy industry. Not only will Toys R Us amplify market competition, potentially driving a boost in the retail real estate sector, but it also heralds the revival of a brand that, just six years ago, was on the brink of bankruptcy.

Between 2017 and 2018, Toys R Us shuttered multiple outlets worldwide due to financial strains and accrued debts. However, a twist in 2021 saw the company reborn under the stewardship of WHP Global. With this fresh leadership, Toys R Us embarked on a strategic overhaul, opening revamped stores in the U.S. These aren't your typical toy shops. Instead, they're interactive hubs for all ages, sporting a more compact layout than their predecessor megastores.

On the Mexican front, Toys R Us has ambitious plans to unveil ten branches over the next five years. These outlets, restricted to a footprint of no more than 1,500 square meters, will be established in partnership with El Puerto de Liverpool. This collaboration aims to leverage Liverpool's anchor store infrastructure to bolster Toys R Us's presence in Mexico. Data from SiiLA indicates Liverpool boasts over 670,000 square meters of commercial space in Mexico's top retail hubs, making it the dominant anchor store tenant.

The toy and game sector in Mexico is fiercely competitive. Homegrown and international brands jostle to grab consumer attention. Heavyweights like Juguetron, Julio Cepeda Jugueterias, and Juguetibici have cemented their footprints over the years, currently occupying 52% of toy store space in shopping centers. Departmental giants like El Palacio de Hierro and Sears also throw their hats in the ring with a vast toy assortment, further intensifying the rivalry.

To stand out, companies must not only deliver top-tier products but also craft innovative marketing strategies and provide stellar shopping experiences. The digital age, coupled with e-commerce's meteoric rise, has nudged many brands to bolster their online presence, dishing out exclusive deals and speedy deliveries.

Recent data from Statista and NPD Group values Mexico's toy industry between $1.8 billion and $2.1 billion. Findings reveal that 70% of toys and games sold in Mexico are imported, with 40% of sales happening online. Notably, plastic toys, youth games, construction sets, and plush dolls drive a whopping 78% of total sales.

Over the next five years, the industry is projected to see moderate growth, with an average annual rate of 0.23%.

The Evolution of Toy Retail in Mexico

In the past three years, toy store space in shopping centers has surged by 18%, jumping from 22,200 to 23,300 square meters between Q3 2020 and 2023, as per SiiLA Market Analytics.

Typically, toy stores favor smaller outlets at most 160 square meters. In fact, half of the industry's space is spread across such sized outlets. Another 27% is housed in medium-sized venues, around 340 square meters. In stark contrast, megastores of 1,000 square meters and above account for a mere 12%.

Mexico's toy retail landscape has witnessed a dramatic shift. Once primarily sales points, toy stores have pivoted towards crafting unforgettable experiences. Interactivity and play are now integral to store designs, aiming to offer families more than just a purchase - a unique memory. This trend is mirrored in the diversification of outlets, with smaller stores striving for personalized service, while larger ones emphasize a broad product range and activities. Collaborations between toy stores and anchor stores have also proven to be a potent strategy for amplified mall presence.

It's clear that in this ever-evolving market, brands must swiftly adapt to the shifting consumer needs to stay relevant and competitive. The entry of heavy hitters like Toys R Us poses both a challenge and an opportunity for incumbent brands. Toys R Us's value proposition, rooted in experience and interaction, might set it apart from rivals and allure a new consumer segment seeking more than just a toy.

For deeper insights into this and related retail sector topics in Mexico, dive into SiiLA REsource or contact us at contacto@siila.com.mx