J.C. Penney pins holiday hopes on Lego partnership
J.C. Penney on Monday said that it’s expanded its toy selection for the holidays by 40% with brands like Disney, Hasbro, Mattel, Playmobil, Fisher Price and Melissa and Doug. Online, the department store retailer says it has quadrupled its online selection of toys since last year, giving a bigger selection of motorized ride-on vehicles, outdoor play equipment, bicycles, learning sets and more, according to a company press release.
Starting in November, 875 toy shops within Penney stores will feature 30 Lego sets — including Lego Classic creative building boxes, Lego City sets, Lego Friends sets and Star Wars and Super Heroes editions — ranging in price from $4.99 to $69.99. An expanded selection of more than 100 Lego products will be available in December online, according to the release.
The holiday quarter will be all the more crucial for the retailer after announcements last week that the company is cutting its guidance for the third quarter and overhauling its women’s apparel merchandising.
Toy sales have been robust in recent years, and more department stores are returning to the category after several ditched it decades ago.
That means more competition, not least from Amazon, whose toy sales last year were some $4 billion, about 20% of the market, according to Jeffries analyst Stephanie Wissink. More than half of those came during fewer than 60 selling days, and more than a third (35%) took place in December alone. Macy’s also added toys to its off-price Backstage pop-ups in full-line stores, Hudson’s Bay added toys to its holiday merchandise and Kohl’s brought in the popular American Girl doll line for the season.
Toys R Us isn’t out of the picture, but its fourth quarter consolidated net sales last year fell $192 million year-over-year to $4.66 billion, due mainly to a decline in same-stores sales and store closures in the U.S., including the company’s Times Square flagship store in New York. After declaring bankruptcy last month, the toy retailer secured needed financing for holiday inventory and hiring, which also worked to assuage nervous vendors.
With the importance of toy sales at the holidays, this tie-up is imperative for J.C. Penney and smart for Lego, according to Jim Fosina, CEO of Fosina Marketing Group. "This is a necessary move for J.C. Penney as Amazon and even Walmart continue to gain market share as in store traffic decreases," he told Retail Dive in an email. "It would be great if they could have gotten Lego in store before December. This is likewise smart and necessary on the part of Lego, as Lego itself has been downsizing."
Like Amazon, Penney is taking advantage of the Toys R Us financial crisis by expanding its assortment, he also said. "Toys are still going to be bought at the holidays (and all year long) no matter what, but moving in on the retail toy consolidation is smart," he said.
Penney's larger online assortment could even help it regain market share lost to Amazon, Fosina said. "This year will be a year to watch channel conflict between retailer, retailer’s online presence and Amazon, as all will be fighting to sell big brands like Lego," he said. "This should be reassuring for Lego as their product still dominates and commands market demand from decades of innovation."
Even more effective would be a Penney-exclusive Lego box, he said. "Lego has the perfect continual series of products in its verticals and genre, and J.C. Penney has the ability to communicate directly with its customers. Put these two together and regaining market share from Amazon becomes a reality."
Penney, meanwhile, has hit a bump in its turnaround, with women's apparel sales that have failed to meet expectations, making its holiday quarter all the more important. CEO Marvin Ellison said last week that the retailer decided, after seeing positive initial results, to accelerate "a wider transformation of the entire women's department by clearing slow-moving inventory, primarily in women's and other apparel categories."
- press release JCPenney Builds on Toy Shops with LEGO® Partnership
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