Kmart on Tuesday announced a couple of efforts designed to capitalize on the downfall of Toys R Us. To start, the Sears Holdings-owned retailer is accepting Toys R Us gift cards — which Toys R Us itself has ceased accepting — in exchange for $10 in "Freecash" points through the Shop Your Way loyalty program.
Now through July 31, Kmart is accepting even expired Toys R Us or Babies R Us gift cards, although the exchange is for $10 in Freecash no matter the amount on the card, according to a Kmart press release.
Through its Toy of the Month program, the retailer is also giving shoppers $5 in Freecash points toward the in-store purchase of any $5 or more item in the toys department.
With Sears Holdings on its knees and Kmart struggling to get customers in the door, the banner could use more cash from shoppers in its till, and not just expired gift cards from Toys R Us.
In January, parent company Sears Holdings announced it would shutter 64 Kmart stores and 39 Sears stores by spring, just the latest in a series of store closures that have drastically shrunk two of the once most ubiquitous banners in American retail. Sears and Kmart, along with Macy's and J.C. Penney, are "future-proofing their offerings by closing stores," according to a report this year from retail think tank Coresight (formerly Fung Global Retail & Technology).
"We estimate that these closures will result in a total of $2.5 billion in annual sales being freed up for alternative retailers to grab," the report noted. "Approximately $1 billion of that total will come from Macy's closures, $1 billion from Sears and Kmart closures, and $500 million from J.C. Penney closures, we estimate." Fung analysts added that, based on shopper preference data, Macy's was likely to retain the highest share of sales from closed stores and Sears would see the lowest retention rates.
But turnabout is fair play, and, as a major purveyor of toys and baby items, the struggling retailer could easily see something of a bounce from the demise of Toys R Us. Others are similarly seizing on the opportunity — Toys R Us's departure is likely to increase the market power of Target, Walmart, Amazon and other massive retailers that don't rely on toy sales year round and can afford to lose sales on them during the holiday season.
Small businesses are also expecting a boost: The independent toy retailer members of the American Specialty Toy Retailing Association on Friday promised that this year will be "the best year yet for neighborhood toy stores nationwide" because of the market share relinquished by the iconic toy retailer.
Toy makers, on the other hand, are taking a hit with the important Toys R Us channel gone. Hasbro on Monday reported that first quarter 2018 revenues fell 16% to $716.3 million due to the liquidation of Toys R Us and retail inventory overhang, primarily in Europe. Hasbro shares slid on the news, as did shares of toy manufacturer Mattel, which reports later this week.