Amazon started producing its own toys under its AmazonBasics private label, stepping into the giraffe-sized hole Toys ‘R’ Us left in the American toy market.
Private-labeling, Amazon’s next step on its march to ultimate e-commerce efficiency, sent shivers down the spines of toymakers from Mattel to the North Pole. But what would a future without toy stores look like?
The next chapter in Amazon’s playbook
We all know how the story starts: Amazon targets an industry, undercuts existing sellers until they fold, and adds the leftovers into its marketplace (RIP Borders, Tower Records, Circuit City, Sears…).
Amazon started private labeling in 2009 with AmazonBasics. But it’s only recently taken off: The number of Basic items for sale jumped from 252 in 2013 to more than 1.5k in 2017.
Now, Amazon’s private label business in on track to bring in $7.5B this year and expand to a $25B business by 2022.
The Lego tables have turned
When Bezos was just beginning to bruise the bookselling industry in 1999, Amazon “all but begged for permission to sell products from mass toymakers like Hasbro,” Quartz reports.
But Amazon’s workshop now caters to buyers left brokenhearted and empty-carted when Toys ‘R’ Us departed.
This poses a big threat to toymakers: After the news of Amazon’s plans surfaced, Mattel shares dropped more than 3% and Hasbro shares dropped more than 1%.
Holiday magic, coming soon to Amazon Prime
The future of toy stores is uncertain, but their dilemma isn’t unique. When Amazon started selling books, not all booksellers disappeared — some quaint old souls kept (a few) bookstores alive.
Since toy buyers (we’re talking about the ones who tug on their parents’ coat sleeves) enjoy visiting toy stores, some may survive — but what will the toy store survivors look like?