Toy stores struggle as bargain-hunting is the name of the game this holiday season in Canada

There’s trouble in Toyland — and Mastermind isn’t the only one feeling the pressure.

Canada’s toy retailers say they’ve long been grappling with the same challenges that nearly killed the ailing company and some fear this holiday season will be difficult as shoppers adopt more budget-conscious behaviours.

“People stand in your store and they scroll to see where they can get it cheaper,” said Erin Salisbury, shopkeeper at The Swag Sisters’ Toy Store in Toronto.

“It can even be a matter of $3. That doesn’t make a difference.”

Shoppers’ dedication to seeking the lowest price is not new, but it is being exacerbated by high interest rates and inflation, which have shoppers thinking twice about some purchases and only making others if the price is right.

Though such patterns are being felt across most sectors, they’re an extra layer on top of the lengthily list of woes the toy industry faces: increasing competition, the rise of giants like Amazon, a slow recovery from the COVID-19 pandemic, more interest in second-hand goods and a shift toward digital and experiential gifts.

It’s been a “tough” year for the entire toy market, said Jeff Bowes, toy industry analyst with market research firm Circana.

While the industry grew 30 per cent between 2019 and 2022 when people were at home during the pandemic and seeking entertainment, this year has been marked with declines.

“Three-quarters of Canadians are telling us they’re planning on cutting back spending due to inflation … and this figure is even higher among those under the age of 45, which is your core toy buyer,” he said.

When they are willing to purchase, some don’t step foot in a toy store. Walmart, Canadian Tire Corporation Ltd., Indigo Books & Music Inc. and Costco all sell toys, as do online behemoths such as Amazon and Temu.

“We have people every Christmas who come in and say, ‘Oh, my Amazon order hasn’t shown up yet and I wanted to see what I’m getting or I’m going to buy duplicates in case it doesn’t come and I’ll just come back. What’s your return policy?'” said Salisbury.

“They’re not embarrassed at all.”

At Calgary-based Castle Toys, sales have picked up in the last week, but owner Nicholas Mason noticed the season began with a pullback.

“We’ve noticed that people have been really holding off and looking for bargains and deals,” he said.

Swag Sisters focuses on classic toys and sells several brands that bigger retailers won’t have on shelves, but Salisbury said independent shops often can’t access the range of products or lower prices some top manufacturers offer to bigger chains.

Salisbury couldn’t stock 2021’s hot toy, Magic Mixies, from Australia-based Moose Toys, and she uses third parties to source products made by Spin Master Corp., the Toronto-headquartered company behind Paw Patrol, Hatchimals and Rubik’s Cube.

“When we got our first Lego catalogue, I assumed we had the options to order any Lego like any other store and then all of a sudden somebody asked us about a couple sets and I was like’That’s not in the catalogue,'” Salisbury recalled.

“I walked into Toys “R” Us to see what they were talking about and there were sets that we don’t even get to see.”

But big toy companies have their struggles too.

Toys “R” Us has been working to restore the brand to its former glory since 2017, when it filed for Chapter 11 bankruptcy in the U.S. It mostly operates through shops within Macy’s department stores now.

Toys “R” Us Canada — a separate entity — sought creditor protection around the same time as the U.S. business. It was eventually sold to Fairfax Financial Holdings Ltd. for $300 million and is now owned by Putman Investments, which is behind Everest Toys, Sunrise Records and HMV.

Putman was in talks to buy Canadian toy chain Mastermind, but the parties abandoned the purchase earlier this year, when regulatory approvals were taking too long to obtain.

Citing increased competition and trouble recovering from the pandemic, Mastermind filed for creditor protection in November and announced plans to close 18 stores. Unity Acquisitions Inc. later stepped in to buy the remaining business.

J.C. Williams Group retail strategist Lisa Hutcheson predicted much of the consumer spending will be done at big box retailers this season.

“I think about the Walmarts and the Costcos because people are just going to shop those aisles because of convenience,” she said.

But she said there is still room for mom-and-pop shops, especially those offering screen-free toys.

That would be welcome news for Toad Hall Toys in Winnipeg, where shelves are devoid of Hasbro and Mattel but Canadian and European brands are plentiful.

“Once you have four Saturdays in December (before Christmas), people tend to shop a little later,” owner Kari England said.

And when Hanukkah falls closer to Christmas, sales are stronger than when it falls earlier, which it does this year.

Though she has yet to see a pullback in sales, she said “time’s going to tell.”

“My dad always says at this point of the game all we know is what hand we’ve played, and we have to see if we played a good hand,” she said.

“We won’t know that until the 24th.”

This report by The Canadian Press was first published Dec. 11, 2023.

Companies in this story: (TSX:CTC, TSX:IDG)

Tara Deschamps, The Canadian Press