What’s the Story?

This holiday season is the third without the big-box version of Toys “R” Us. Major retailers, such as Amazon, Kohl’s, Target and Walmart, have looked to fill the void created by the 2018 liquidation of Toys “R” Us. The competition is heating up among these retailers as they race to consolidate their market positions by winning over former Toys “R” Us customers who are looking for a new go-to shop for toys.

Why It Matters

According to a Coresight Research survey, undertaken on September 14, around seven in 10 US holiday shoppers expect to switch spending from services to products this holiday season. Of those, about 21% expect to switch spending from services to toys or games this holiday season. Our survey also found that nearly 39% of holiday shoppers expect to buy toys or games as gifts this year. Coresight Research estimates that overall holiday sales will grow by around 5% year over year in 2020.

Amazon, Kohl’s, Target and Walmart have introduced a number of initiatives to drive toy sales this year; we will discuss these in this report, in addition to assessing the top toy trends in the US for holiday 2020. The appendix includes this year’s “top toys” lists from these four retailers.

US Toy Industry Likely To See Solid Growth This Holiday Season

Coresight Research estimates that US holiday 2020 toy sales will grow by 5–10%, compared to the 2019 holiday season, which was negatively impacted by six fewer shopping days between Thanksgiving and Christmas. Growth will be mainly driven by coronavirus-led social isolation measures and travel restrictions. This year, the Covid-19 pandemic is seeing many parents turn to toys to keep their children busy and active amid more online school classes and cancellations of organized and school sports activities. Furthermore, toys and games are providing at-home entertainment for the entire family. These factors are contributing to the growth of the US toys market in 2020.

In the first half of 2020, US toy sales grew 16% year over year against weak comparatives (sales declined by 9% in the first half of 2019), according to market research firm NPD. Sales growth was seen across multiple toy categories in the first half of the year: games and puzzles, 37%; outdoor and sports, 27%; building sets, 14%; arts and crafts, 11%; and explorative and other, 1%.

The coronavirus pandemic has pulled forward some holiday demand, as evidenced by the strong first-half growth, which might lead to some softening of holiday sales growth. However, we still believe the US toy industry is likely to witness high-single-digit growth during the holiday season, owing to continued self-isolation and limited entertainment options available amid the ongoing pandemic.

This year, the holiday shopping season started early, in October, across all of retail—including for toys—which is positive for holiday sales. We expect the e-commerce channel to drive a significantly greater share of 2020 holiday toy sales than last year. Although this may reduce some of the additional impulse toy purchases that parents would have made while browsing up and down aisles in stores to fill their baskets, the online shopping trend will provide strong opportunities for online retailers to engage consumers.

What We Have Seen from Retailers This Year

Major US retailers have recently released their lists of the top toys that will be in demand over the 2020 holiday season:

Amazon released its “Toys We Love List” for the 2020 holiday season on September 8. The list includes 148 toys (versus 124 last year) that promote learning, playing and entertainment, with a focus on the large number of families that are spending more time at home. Some of Amazon’s top toys include Barbie, Hot Wheels, LEGO, L.O.L. Surprise!, Melissa & Doug, NERF (a Hasbro brand), Osmo, Play-Doh and Ravensburger; and characters from Marvel, Disney, Star Wars, Bluey, PJ Masks and Blue’s Clues & You!

Recently, Amazon entered into a partnership with Toys “R” Us to provide digital capabilities and fulfillment services for the new Toys “R” Us brand going forward. In August 2020, Toys “R” Us ended its relationship with Target, which had been the brand’s exclusive fulfillment partner.

Kohl’s released its top-rated toys list for the 2020 holiday season on September 30. The list includes 48 products (compared to 28 last year) across categories such as STEM (science, technology, engineering and math), gaming, building sets, dolls, collectibles, vehicles and action figures. The retailers’ list includes several exclusives, such as The Child (Baby Yoda) and Mandalorian Plush, a Marvel Titan Hero Series multi-pack, Blue’s Clues & You! Drum Set, LEGO Trolls Vibe City Concert building set, Nickelodeon Slime Super Slime Unboxing set and a Kid Made Modern Ultimate Craft Kit, among others.

Target unveiled its top-rated toy list for the holiday season on October 8. The list includes 76 products—its biggest ever list, comprising more than double the 26 products the retailer included in 2019. For this holiday season, Target entered into a partnership with US-based toy manufacturer FAO Schwarz for a 70-piece exclusive toy collection. Furthermore, Target will open a pop-up experience at the FAO Schwarz flagship in New York City. As part of the alliance, the FAO store will feature over 300 items from Target’s private-label brands.

For every top toy sold, Target will donate $2, up to a total of $1 million, to Toys for Tots, a charity program run by the US Marine Corps Reserve that distributes toys to children whose parents cannot afford to buy them gifts. Target’s lineup of toys and games for the fall season comprises over 600 items that are exclusively available at Target and includes toys from brands like Barbie, Disney, LEGO, L.O.L. Surprise! and NERF, among others. Overall, the retailer is offering over 2,500 new and exclusive toys, nearly double the total from holiday 2019.

Walmart’s “Top Rated by Kids Toy List” includes 36 of the hottest toys for the 2020 holiday season (versus 47 last year) and was released on September 3. In September, Walmart also launched the Walmart Wonder Lab for the 2020 holiday season, in partnership with interactive multimedia and technology company Eko. The free, online, interactive digital hub invites children to test this year’s top-rated toys using their computers or tablets. Through the Walmart Wonder Lab, children can play with some of the newly released toys online via a virtual controller and add products to their wish lists. The items in the Wonder Lab contain a link to a corresponding listing on Walmart’s website, where parents can buy the products.

Steve Ronchetto, Vice President of Toys at Walmart, said in a press release, “More than any year before, we are seeing strong interest across toys that stem from digital platforms—like kid-influencer-created toys—interactive and educational toys, screen-free indoor entertainment and toys for active outdoor play.” Similarly, bikes and ride-ons, board games, puzzles and mystery games (such as L.O.L. Surprise products and Hatchimals), remain hot this year, according to Brad Bedwell, Walmart’s Merchandising Director of Preschool. According to Bedwell, some social media trends are even driving toy development for the 2020 holiday season.

Walmart expects to see continued demand for toys this year and is stocking up on more toys and routing a bigger proportion of inventory to fulfillment centers to meet surging online orders. Furthermore, to ensure sufficient stock in the holiday season, the retailer ramped up production and purchasing of certain toys. As in previous years, Walmart continues to offer several convenient shopping options for its customers, including in-store pickup and express delivery, among others.

Top Toy Trends in 2020

The top toy trends for the 2020 holiday season can be inferred from the top-rated toy lists that have been released by major retailers, such as Amazon, Kohl’s, Target and Walmart (see appendix). Based on these retailers’ lists, we have classified top toy trends for the 2020 holiday season into eight categories:

• Aspirational play toys
• Interactive/nurturing toys
• Kid-influencer toys
• Licensed entertainment character toys
• Online gaming and tie-ins
• Outdoor Toys
• Retro toys
• Unboxing/surprise toys

We discuss these trends below.

Aspirational Play Toys

Aspirational toys are gaining huge popularity among parents as they incorporate features that enhance a child’s ability to learn, nurturing their natural curiosity and motivating them to explore skills and interests that could potentially guide their future career path. These toys aim to develop STEM skills among children by enabling them to construct and build models or play with DIY computers, electric motors or programmable robots in a safe way.

We list two notable aspirational play toys below:

Discovery Build & Create Robotics, recommended for children aged 12 and above, is featured in the Target’s top-toys list for holiday 2020. This toy allows children to build and create three robots: a spider robot that runs on electricity, a car that runs on salt water and a robot powered by sun that can transform in seven different ways.

LEGO City Space Mars Research Shuttle 60226, which is featured in Amazon’s top-toys list, allows children to build a NASA-inspired space shuttle by assembling the parts and using intuitive building instructions that lets users zoom, rotate and visualize their creation using the special “ghost” mode.

[caption id="attachment_118292" align="aligncenter" width="550"] Discovery Build & Create Robotics Kit
Source: Amazon[/caption]  

Interactive/Nurturing Toys

Interactive toys are positioned as fun tools to encourage cognitive development among children from a young age. In recent years, interactive toys have featured prominently on several retailer’s top-toys lists. This category has become even more crowded in 2020 with the introduction of a number of new products:

• Gotta Go Flamingo (by Little Live Pets): This toy is featured in the top-toys lists of Amazon and Walmart. Released in September, the product is a toilet-trained flamingo that wiggles, sings, chats back, eats and uses the toilet.

[caption id="attachment_118293" align="aligncenter" width="300"] Gotta Go Flamingo
Source: Walmart[/caption]  

• Squeakee The Balloon Dog (by Squeakee): This electronic dog is featured in Target’s, Walmart’s and Amazon’s top-toys lists. It responds to touch and interacts with noises and actions. The child can teach Squeakee tricks, pet him, feed him, and inflate and deflate him.

Kid-Influencer Toys

YouTube-based kid influencers, aged between six and 12, continue to drive toy sales by connecting and engaging with other children as well as their parents. Ryan’s World, a top-rated kid-influencer brand, features in the 2020 top-toys lists of Kohl’s, Target and Walmart.

[caption id="attachment_118294" align="aligncenter" width="550"] Ninja Ryan Vs. Dragon Ninja Mommy Challenge for the Ryan’s Shadow Warrior Mystery Box, which is featured on Target’s top-toys list for holiday 2020
Source: Ryan’s World/YouTube[/caption]  

Licensed Entertainment Character Toys

This year is particularly challenging for licensed toys and games as theaters have been closed and major movie releases have been delayed, such as Marvel’s Black Widow, Minions: The Rise of Gru, Top gun: Maverick, Trolls World Tour and the latest instalment of Scooby Doo. To drive consumer engagement during the holiday season, retailers are advertising products on various digital platforms, such as YouTube and Nickelodeon.

Some of the licensed entertainment character toys that feature in the top-toys lists for the 2020 holiday season are Stars Wars, LEGO and Disney’s Frozen 2.

[caption id="attachment_118295" align="aligncenter" width="300"] Disney’s Frozen 2: Magic in Motion Elsa Doll
Source: Walmart[/caption]  

Online Gaming and Tie-ins

Online gaming and tie-ins continues to be a big trend among both children and parents this year. This holiday season, we will be witnessing the release of both the new PlayStation and Xbox models.

• PS5 from Playstation: Featured in the top-toys lists of Kohl’s and Target, this gaming console from Sony will be released on November 12, 2020. PS5 is going to have the largest screen among the gaming consoles in recent history, with a screen size of 15.4 inches. Compared to PS4, PS5 offers easier storage upgrades, provides more ports and uses a custom-designed liquid-metal thermal conductor to absorb the higher amount of heat it produces.
• Xbox Series X: Featured in Target’s top-toys list, this gaming console from Microsoft will be released on November 10, 2020. According to Microsoft, the Xbox Series X is the most powerful Xbox to date, with an updated processor that has four times the processing speed of the Xbox One (launched in 2013) and upgraded storage, allowing faster startup of games with shorter loading times.

[caption id="attachment_118296" align="aligncenter" width="500"] PS5 from Playstation
Source: Playstation[/caption]  

Outdoor Toys

As the coronavirus pandemic has caused kids to stay at home for more time, getting them outside and active has become more of a priority for most parents. This year, retailers have introduced a number of toys in the outdoor category:

• Huffy Neowave Three Wheel Scooter: Featured in Kohl’s top-toys list, the preschool scooter features 46 bright LED lights—23 on each side of the scooter fork and deck ends.
• Walmart-Exclusive Semi-Truck and Trailer Ride-On by Kid Trax: Featured in Walmart’s top-toys list, the semi-truck has a maximum speed of four miles per hour (6.4 kilometers per hour), providing both fun and safety. It offers a removable trailer with dual-hinged opening trailer doors, along with working cab lights, a public address system, and engine and horn sound effects.

[caption id="attachment_118297" align="aligncenter" width="550"] Walmart-Exclusive Semi-Truck and Trailer Ride-On by Kid Trax
Source: Walmart[/caption]  

Retro Toys

Many parents are looking to share with their children the toy characters that played a big part in their own childhood. Retailers are responding to this trend by selling classic low-tech toys for all ages this holiday season. Furthermore, the crisis means that parents who are financially stretched are likely to buy something they know well rather than take a risk and spend money on something unknown.

Some of the classic toys that are making a comeback in retailers’ top-toys lists include the G.I. Joe Retro Collection, which is based on the G.I. Joe action figure line of the 1980s, The Transformers Funko Pops and a Star Wars backpack.

In September, Nintendo celebrated Super Mario’s 35th birthday by unveiling new and new-to-Switch Mario-centered games for the 2020 holiday season, such as “Super Mario 3D World,” “Super Mario 3D All-Stars” and “Super Mario Bros. 35.” The new titles are a mix of the old and the new, capitalizing on nostalgia while also experimenting with characters.

[caption id="attachment_118298" align="aligncenter" width="550"] Super Mario 3D World by Nintendo
Source: Nintendo[/caption]  

Unboxing/Surprise Toys

Unboxing continues to be a big trend this year, as the surprise element involved in unwrapping a toy appeals to children.

There have been a couple of notable newcomers to this list in 2020:

• L.O.L. Surprise! OMG Remix 4-in-1 Plane: Featured in the top-toys lists of Amazon and Kohl’s, the product offers over 50 different surprises and can morph from an airplane into a car, a recording studio and even a mixing booth.
• Walmart-Exclusive Ryan’s World Vending Machine: Featured exclusively at Walmart, the toy offers 16 surprises. Children can insert coins and select a snack, with each snack holding a fun surprise. The toy also features sounds, lights and phrases from the Ryan character.

[caption id="attachment_118299" align="aligncenter" width="400"] Walmart-Exclusive Ryan’s World Vending Machine
Source: Walmart[/caption]  

What We Think

We expect sales of US toys to grow in the high-single digits year over year this holiday season, mainly supported by strong online sales. Amid the coronavirus pandemic, parents are likely to turn toward toys that keep their children busy and active, as well as those that provide entertainment for the entire family. Demand for toys will be further supported by US schools moving classes online and parents working from home due to Covid-19.

Implications for Retailers

• There are huge opportunities for online toy retailers to offer unique and value-based shopping experiences to facilitate consumer engagement and spending. However, the online shopping trend may see a reduction in the impulse purchasing that typically happens in stores.
• Toy retailers can drive sales this holiday season by offering toys that are not just appealing to children, but also parents; incorporating influencer marketing into their strategies; and ensuring seamless integration of online and offline channels.

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Appendix

Selected US Retailers’ Lists of Top-Rated Toys, 2020

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