Retail

Walmart gets creative, goes virtual as it plans for holiday toy shopping

Key Points
  • Walmart's preparations for toy shopping over the holiday season looks very different during the coronavirus pandemic.
  • Among the changes, the retailer has relied on a virtual focus group of kids to pick the hottest toys, developed an online alternative to store demos and shipped more toys to fulfillment centers in anticipation of online orders. 
  • Even with the pandemic and recession, Jefferies' Steph Wissink said she expects toys to remain a strong category and sales to look the same as last holiday season.
Toys on sale at a Wal-Mart location in Burbank, Calif.
Patrick T. Fallon | Bloomberg | Getty Images

Before each holiday season, Walmart gathers hundreds of kids at a convention center near its Arkansas headquarters.

The young testers try out lots of toys and pick those they would like to get from Santa. That shapes the retailer's list of top toys and determines which ones it orders in abundance.

This year, the company mailed toys to several dozen kids to test at home. It's one example of how the coronavirus pandemic has changed norms for the holiday season — even before it has truly begun.

Walmart had to come up with the workaround for its toy testing group to compile its list of top-rated toys. It developed an online tool that lets kids virtually unbox, test and play with toys since multiple kids can't wheel around the same truck or play with the same doll in store aisles or at demos due to the pandemic.

Walmart Wonder Lab will allow kids to try over 100 toys and guide virtual hands to interact with them. It's a scaled-up version of a tool the company had the past two holiday seasons.

Walmart's Brad Bedwell said the retailer has shipped more toys to fulfillment centers this year because it anticipates many customers to buy them online.

Toys that will be sold this holiday season hit store shelves in August to see how they performed, said Bedwell, merchandising director of preschool toys and omni merchandising.

This year's top-rated toys range from classics like Lego to outdoor toys like scooters and hoverboards to unique products like Squeakee, a interactive balloon dog from Moose Toys that makes sounds and does tricks and sells for $59.88. Unlike last holiday season, there will also be a number of items tied to the popular Disney+ show "The Mandalorian," including a Bop It! game designed to look like The Child, made by Hasbro, that will sell for $14.88. 

Squeakee the Balloon Dog
Courtesy of Walmart

Toy sales have shot up during the pandemic — a trend that retailers hope continues into the holidays. Toy sales' year-over-year percentage growth has been in the double digits since March, according to data from the NPD Group. They especially jumped in May, rising 37% from a year earlier, as parents bought outdoor items from swing sets to water toys. 

Steph Wissink, managing director of Jefferies, said "toys have had a renaissance" as many families pass time during the pandemic by playing board games, riding bikes and completing puzzles.

More of that spending has been online. About 25% to 30% of all toy sales were online in the U.S. prior to the pandemic, Wissink said. More than 50% of toy sales were online at the peak of the pandemic, and it could be 35% to 40% afterward, she said.

This holiday season, some parents will feel cash strapped during the recession. Others may see the many toys they bought during the pandemic strewn across the living room floor or backyard.

Wissink, though, said a holiday habit will remain: Parents will want to make the season special.

"If you know someone who has children, how often do you expect them to sit their kid down and say 'No presents under the Christmas tree because you got them in March,'" she said. "It doesn't happen."

That's why toy spending to look the same as last year, she said.

Walmart is the top toy retailer in the U.S. It has about 25% in market share, followed by Amazon with about 20% and Target with 15% to 20%, according to data shared by the companies and Jefferies. 

Bedwell said he thinks the newness of toys on shelves will fuel sales. Plus, he said, parents will want to make their kids happy — especially during an unusual and stressful time.

 "This is really a category that can spark some joy for our customers and kind of deliver on what makes staying at home fun," he said.

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