Tuning in to toys

As music retailers continue to experience declines due to customers' rising preference for downloading as well as ongoing competition from the big boxes, savvy media chains are taking advantage of what pop-culture fans already know: toys and collectibles are big business.

Action figures, unusual plush, pop-culture collectibles, lunch boxes, and keychains and other impulse items are all proving to be solid sellers at music and media stores across the country.

“Two years ago we began expanding our lifestyle offerings,” says Maureen Ferguson, divisional merchandise manager for Virgin Entertainment Group, Lake Balboa, Calif. “In order to keep a healthy business, we looked at other entertainment categories that would still be relevant to our credo 'music is the glue.' Action figures is a category that had enjoyed excellent sell-through, so we started attending Toy Fair and looking aggressively for other items that we felt would work for our customer.” In addition to action figures, Virgin Megastores' toy offerings now include plush, games and collectibles, which are displayed together as well as cross-merchandised through its stores with T-shirts, books and music from related properties.

“In the beginning, we had to solicit vendors. Now we get phone calls daily for product that 'would be perfect in Virgin,''' Ferguson says.

McFarlane Toys, Tempe, Ariz., is one of the manufacturers that found a home at Virgin and its competitors. Music stores are “definitely one of the growing portions of our business,” says Corinne Robinson, sales director for McFarlane. “Trans World is carrying our products in its FYE, Suncoast and Sam Goody stores, and we are seeing most of our growth through the FYE chain.” Value Music also distributes McFarlane Toys in its stores, Robinson says.

Robinson sees music retailers' willingness to expand into the toy arena as a boon for both stores and their customers. “I think it's actually beneficial to have multiple toy vendors in a store, to make it more of a destination place for toys, especially specialty toys.”

Robinson credits the changing music business for the shift towards toys, including getting smaller, independent stores getting into the act. “I imagine the toy margins are better than music, because they're competing directly to sell the exact same CD at Target, Wal-Mart, Best Buy, everywhere...”

SOTA Toys, Lake Balboa, Calif., is also finding success with music chains and independents, as well as so-called “trend stores,” says sales director Josh Gold. “If you throw in Tower Records and Hot Topic and Trans World, they probably stand for about 35 to 40 percent of our business.” The company's current largest distributor is Albany, N.Y.-based Trans World Entertainment, which has placed product in its Suncoast and FYE chains. “It really was the big success of the Fall Out Boy figure line that brought them into it, and they've picked up more and more of our product,” Gold says.

Gold says SOTA is banking on its distribution in these newer channels to continue to grow. “That's going to include Spencers and Hot Topic, Trans World, Hastings and Newbury Comics.” SOTA also distributes toys through Georgia Music and Diamond Comics.

Keeping the focus on these specialty chains and independents “is where we all came from,” Gold adds. “So we couldn't turn our back on them even if we wanted to...Our whole genre tends to stay away from the big mass-merchant chains. They just never seem to do very well with our product lines,” Gold says. “To be honest, we like being the kind of cutting-edge cool stuff that the kids want to get at the cool stores...I think the day that mom can walk into Wal-Mart and buy our product, we've probably done something wrong.”

Over at Pretty Ugly LLC, Kenilworth, N.J., the ubiquitous Uglydolls are finding success in a wide range of new channels, including independent music stores as well as chains, says Alita Friedman, director of sales and operations. “Music stores have really become lifestyle shops and selling toys there makes sense,” Friedman says. “The toys are really further expressions of the consumers…no different than the variety of music someone buys. The toys become part of your everyday life.”

Uglydolls owes its distribution in music stores to demand from buyers looking to diversify their offerings, Friedman notes. “We feel that there is tremendous growth opportunity in this channel,” she says. “We expect to grow considerably in the music store venues. We have only touched the surface there.”

At Dark Horse Comics, Milwaukie, Ore., the company “has enjoyed a good relationship with specialty music retailers” in many areas, says David Scroggy, vice president of product development. “It's no secret that these stores are desperately trying to diversify their product mix in order to stay viable. This is good news for companies who offer something hipper and edgier than the normal mass-market fare.