Toy makers are exploring novel ways of selling their products in an attempt to offset declining sales and pricing pressure from the big discount chains.
The shift, which is putting toys on the shelves of apparel retailers such as Gap Inc. (GPS) and consumer electronic chains such as Best Buy (BBY), promises to place even more pressure on traditional toy retailers as they head into what is expected to be another cutthroat holiday season, analysts said.
Hasbro will begin selling a color-screen version of its popular VideoNow (search) personal video recorder this fall in Best Buy and Circuit City (CC). Previous versions of VideoNow were available only at traditional toy stores and discounters, said Brian Goldner, president of Hasbro's (HAS) toy division.
GapKids is currently selling a "gear bag" that comes with a Pathfinder Tool from Wild Planet, a maker of "spy" equipment and other toys. The Pathfinder, which is packaged separately but attached to the bag, includes a telescope, magnifying lens, compass, flashlight and tweezers.
The retailer of towels, pots and other products for the home is now a close third to Wal-Mart (WMT) and Toys 'R' Us (TOY), the respective first and second largest distributors of the bubbles, said Susan Spiegel, Funrise's director of marketing.
Toy makers long relied on the big toy chains, and more recently discounters, to get their products in front of consumers.
But with kids trading in their Barbies for cell phones at increasingly younger ages, toy sales have steadily declined, falling 3 percent last year to $20.7 billion, according to the NPD Group (search).
Toy makers have had little choice but to try new venues to stimulate sales.
As a result, toys have begun appearing in supermarkets, convenience stores and department stores, placing even more pressure on toy retailers such as Toys 'R' Us that were already reeling from the deep discounts offered by Wal-Mart and Target.
The trend is expected to intensify this holiday season, as a wider variety of retailers get into the toy game, analysts said.
"If you're a toy manufacturer, you don't win just by showing up in Toys 'R' Us anymore," said Sean McGowan of Harris Nesbitt. "And nobody wants to be more dependent on Wal-Mart."
Toys 'R' Us is trying to counter these developments by courting some unconventional channels of its own.
The retailer that is home to Geoffrey the Giraffe, for instance, now manages the toy departments in 1,900 Albertsons grocery stores.
But with Toys 'R' Us in the midst of restructuring its own business — and with last year's bankruptcy filings by the FAO Inc. and KB Toy chains — manufacturers are increasingly looking outside the toy industry for growth.
Boardgame maker Cranium launched Cranium Zigity this year exclusively at Starbucks.
And Hasbro now sells Neopets, a plush, interactive toy in Limited Too, an apparel retailer for kids aged eight to 11.