This month, Hasbro (NYSE:HAS) birthed Darth Tater. Next month? It uses the force, Luke -- the force of the Internet. Announcing plans to launch a direct-to-consumer online storefront in a few weeks couldn't have been an easy decision for the country's No. 2 toy maker.
It's not that hopping on the e-commerce bandwagon with HasbroToyShop.com is a bad idea in itself. Providing a virtual hub for parents to pick up classic Milton Bradley and Parker Brothers board games as well as the latest VideoNow, Weebles, G.I. Joe, and My Little Pony playthings is a novel idea. If Hasbro, a Motley Fool Hidden Gems newsletter service recommendation, can take in more profits by cutting out the retail distribution channel while establishing a connection with the end user -- perhaps in perpetuity -- it will have made a sweet move.
The problem here lies in the possibility of a backlash from retail stores that are affected by the consumer-direct model. Wal-Mart (NYSE:WMT) is now the world's leading toy seller. You do not want to upset the empire that Sam Walton built. If you suddenly see rival Mattel's (NYSE:MAT) wares showcased prominently while Hasbro gear collects cobwebs on the unreachable top shelf, will it be a coincidence or a retaliatory move?
Amazon.com (NASDAQ:AMZN) moves a good amount of Hasbro toys through its site, mostly as a result of its partnership with the country's second-leading toy retailer, Toys "R" Us (NYSE:TOY). Amazon is unlikely to give it a second thought when Hasbro sells some of its toys online, but will this create a pricing conflict with consumers? Will shoppers who pay retail through Hasbro's own site feel cheated if the same items are on sale elsewhere online?
While this isn't the kind of quandary that found Disney (NYSE:DIS) handing over the ownership of its namesake stores to Children's Place (NASDAQ:PLCE), it does suggest that maybe making a direct connection with the consumer isn't always what it's cracked up to be.
Earlier this week, Hasbro posted a small loss for its first quarter. Granted, this is a seasonal company that makes the bulk of its profits during the final two quarters. After Hasbro's rather lackluster holiday season, you can't blame the company for trying to make a difference on its own, but it may come at the price of alienating the very retailers the company still needs. Let's hope the shopping mall Santa's cheeks are red because he's cheery -- not because he's angry.
Should the Darth Tater company go Han Solo in retail distribution?
- Hasbro's poor showing earlier this week wasn't much of a concern in itself.
- However, it did come on the heels of a disappointing holiday quarter.
- Hasbro has been previously singled out in both Motley Fool Stock Advisor and Hidden Gems.
Longtime Fool contributor Rick Munarriz got whupped by his 6-year-old son in Monopoly Jr. earlier this week. He does own shares in Disney.The Fool has a disclosure policy. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
