Christmas 2011 looks to have been a decent year for Japan’s toy retailers, and especially for market leader Toys“R”Us (TRU), which still has no obvious competitors. The market remains wide open.
In 1991, TRU was the first major international category killer and large-store retailer to open in Japan. Political pressure from the US government helped, but having got here it quickly made itself a household name through higher levels of choice and price competition. By 1996, it was the largest toy retailer in Japan.
Its role in the market has been profound, above all in breaking local manufacturers’ lock on the supply chain. In 1992, manufacturers announced in triumph that TRU had agreed to buy from their wholesalers, but 10 years on TRU owned a huge chunk of the market (25% by some estimates), forcing toy manufacturers to work directly with TRU.
TRU also reshaped the toy retail market. Today Japan has a third fewer toyshops than in 1990. Even so, there are still 10,000 toy retailers, almost all small independents, so there is plenty of room for more pruning. TRU now has around 160 stores in Japan and shows what can be achieved by foreign retailers when offering something the locals don’t do.
However after scaling to leadership position, TRU has seen sales fall in the past three years. Electronics chains took away some of the game business, and TRU closed some stores, while others were allowed to age. Now, though, the company is investing again, with many stores being refitted, and profitability has risen.
Despite the fall in sales, TRU still has the toy market largely to itself. Among domestic competitors, Kiddy Land remains relatively small, and Akachan Honpo has been taken more in the direction of maternity supplies by its new owners, Seven & i. The lack of any true domestic competitor means the market remains wide open and it is surprising that European firms have not entered what remains such a rich market for toys.