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Traditional Toys and Games Retailers See a Decline in Mexico but Opportunities Still Exist

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By: Bob Hoyler

    There are two major factors contributing to the relative decline of traditional toys and games retailers in Mexico. One factor, is the popularity of hypermarkets and – especially – department stores as a distribution channel for toys and games in Mexico.  Hypermarkets and department stores frequently offer promotions and discounts throughout the year, and this has long had the effect in Mexico of attracting parents who are looking to stretch their disposable income a little bit further when shopping for their children’s toys.  As a result, the steady popularity of hypermarkets and department stores will continue to pose a major competitive threat to traditional toys and games retailers.

    The other factor impacting the profitability of specialized toy retailers in Mexico is the booming popularity of internet retailing.  Internet retailing is the fastest-growing toys and games distribution channel in the country.  This growth has been driven primarily by the accelerating migration of video games sales to online stores, but consumers of traditional toys and games in search of better prices and year-round bargains have also helped contribute to the growth in online sales.  This has certainly had a negative impact on traditional toys and games retailers in Mexico, but electronics and appliance specialist retailers – which often have a greater exposure to video games hardware and software – have been especially hard hit by this trend.

    As a result of all this, Euromonitor International forecasts that the value share of all toys and games – including traditional toys and games, video games hardware, video games software (physical), and video games software (digital) – sold through department stores and hypermarkets will tick upwards from 31% to 32% from 2016 to 2021, while the value share sold through internet retailing will ramp up from 18% to 23%.  Over that same time period, sales of toys through electronics and appliance specialist retailers are projected to take a serious blow, with value sales through that distribution channel dropping from 6% to 4%.

    One step that traditional toys and games retailers could take to potentially forestall a loss of market share is to fashion their stores into destinations for children and their parents to hang out together and play with toys, potentially by hosting special events or demarcating certain areas of the store to be utilized primarily for play, rather than just offering a selection of toys and games on a shelf.  Making toy stores a fun destination for children and parents would offer a unique shopping experience that the internet retailing would simply not be able to match.

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