Running a business near the holiday peak is no easy feat. Concentration during a five week window demands careful risk assessment because a misstep can be costly, especially when uncertainty drives consumer behavior to be less predictable than ever. Add rising e-commerce competition to the mix and the scenario resembles a perfect storm that leaves less prepared companies struggling to stay afloat.
This describes the current situation in the toy retail sector, according to Iberinform, a subsidiary of Crédito y Caución. It notes that roughly one in five toy businesses faces a high or maximum risk of nonpayment nationwide, with a slightly higher share in certain regions. In Alicante, for instance, 22% of toy stores are in a sensitive zone and sit above the industry average for vulnerability, according to the firm (Iberinform).
One major hurdle cited is structural change driven by interruptions to e-commerce. The share of total sales captured online has grown substantially and rose by 47 percent last year, per data from NPD consulting. While many firms have embraced the shift, smaller players are finding it harder to compete in this evolving landscape (Iberinform).
To these pressures, supply chain bottlenecks and rising product costs add another layer of difficulty. Inflation has narrowed household purchasing power, and as a result, many campaigns started later than usual as families waited to see how the economy would unfold. The same source notes persistent uncertainty contributing to delayed purchases across households (Iberinform).
According to Iberinform, most toy stores have managed to maintain some flexibility in treasury management, but margins continue to be eroded. Average trade margins, which remained around 4.7 percent during the peak pandemic years, dropped to just over 3 percent in 2021 after a challenging 2020, reflecting tighter cost conditions and tighter liquidity constraints (Iberinform).
fragmented sector
The toy store market in this region shows a highly fragmented structure with a large majority of firms classified as micro and small businesses. About 96 percent fall into this category, three percent are medium-sized, and only one percent reach large scale. Geographically, roughly 21 percent of all toy stores concentrate in Madrid, followed by Barcelona, Alicante, Valencia, Seville, and Malaga in decreasing shares, illustrating a distribution pattern typical of a dispersed industry (Iberinform).
Rising inflation is weighing on the pace of recovery for toy sales. The same regions report above-average non-payment risk, with as much as 24 percent in Madrid or Valencia, and around 23 percent in Barcelona, Malaga, or Seville, while Alicante sits near 22 percent (Iberinform).
Another relevant factor in credit risk is the age profile of firms. The share of companies in their first decade shows a high default risk, around 30 percent. This risk declines as firms mature, with roughly 14 percent among those aged 11 to 25 years and about 16 percent among firms older than 25 years (Iberinform).