Wal-Mart, Toys R Us Can’t Keep Up With the Demand for Fidget Spinners (WMT, KKR) – Investopedia
Fidget spinners, the colorful toys that keep children’s active hands busy and sell for anywhere from $2.50 to $25, are a huge hit, and major retailers, including Wal-Mart (WMT) and Toys R Us, are struggling to keep up with the demand.
While the toy has been all the rage for several months now, the demand has not abated with Wal-Mart resorting to air freight to get the spinners directly out of Chinese plants and into the stores at a faster clip. Michelle Malashock, a spokesperson for the firm, told the Financial Times it’s the “biggest craze” the retailer has seen in the past five years.
Meanwhile, Toys R Us, which is owned by Bain Capital Partners LLC, Kohlberg Kravis Roberts & Co. (KKR) and Vornado Realty Trust (VNO), was late to the party and their first shipments hit shelves in the first week of May, according to a Chicago Tribune report. The company is also airfreighting spinners to stores. “They’re pretty much evaporating the minute they get on shelves,” said Richard Barry, executive vice president and chief merchandising officer, to the newspaper. The company will roll out DC Comics and Marvel spinners alongside light up, metallic and glow in the dark ones, the report said. The toy retailer hopes to turn what could easily be a short lived fad into something kids want to collect. (See more: Discount Retailers Whip Out Surprise Earnings)
What makes fidget spinners so interesting is that the trend wasn’t created by a huge toy manufacturer but was born on the Internet. According to the Financial Times, Catherine Hettinger, an engineer, made the first version of the gadget in 1997 but let her patent expire in 2005. More recently new versions of it started showing up on Alphabet’s (GOOG) YouTube and Facebook’s (FB) Instagram. That spawned an industry for individuals and small toy companies to start shipping the devices from China and into the hands of consumers in the U.S. and elsewhere.
Currently fidget spinners are everywhere from toy stores to gas stations. “It’s the wild west,” said Josh Loerzel, vice president of marketing at Zing, a toy manufacturer that ships to Walmart and Toys R Us in an interview with the Financial Times. “The biggest toy I’ve seen in at least 10 years, and it’s been a total free-for-all. It’s not a big-bucks driven, premeditated thing. It blew up the opposite way.” The executive noted Zing is gearing up to ship between 4 and 5 million of the toy in 2017 alone. (See also: The Hottest Toy This Season: The Hatchimal)
It’s not surprising that everyone in the toy industry would be going after the latest craze. For starters, there are no patents, which mean no costly licensing fees. There’s also huge margins on the product for merchants and retailers when it is made in China. It also shows how the toy industry is no longer just the domain of the big manufacturers.
For Toys R Us, its strategy to turn fidget spinners into collectibles might work out. After all, collectible toys are big business for retailers with NPD Group, the market research firm, finding sales of the category increased 33% in 2016, accounting for $1.8 billion or 9% of the toy industry sales. In the Chicago Tribune story, the company acknowledged that kids’ tastes can be fickle but that it’s bullish on the whole trend of creating gadgets that keep kids’ fingers and hands busy. Richard Barry, Toys R Us executive vice president and chief merchandising officer said the retailer is seeing a sales increase of other toys like that, including Rubik’s Cubes and yo-yos.