No Joy in Toyland
By George Anderson
It’s tough in the toy business. After two consecutive years of sales declines, the industry may be headed for a third as a combination of economic factors has many Americans considering cutting back spending this holiday season.
Francie Todd is the mother of two boys who lives in East Lansing, Mich. “You look at the economic climate overall, and this is not a good time to run up the credit cards,” she told The Associated Press.
She also says that the devastation in the Gulf Coast has given her pause to reconsider what celebrating the holidays is all about. “We want to be more about the experience of giving, and less about the getting,” she said.
Ms. Todd is not alone in her thinking and retailers have already begun lowering prices on toys to provide consumers with incentives to shop early.
Many wonder, however, if even low prices will be enough.
Jim Silver, editor-in-chief of the trade publication Toy Wishes, told the AP, “It’s going to be extremely competitive to draw customers to their stores.”
Wal-Mart has dropped prices on some popular toys by up to 30 percent and competitors, such as Target and Toys R Us, are following suit.
“We will absolutely be competitive with Wal-Mart this holiday season,” said Lena Michaud, a Target spokesperson.
Toy sales were down five percent this year in the period from January to August, according to NPD Group.
Moderator’s Comment: Are a large number of consumers reevaluating their whole approach to the holidays? What will that mean for toy sales and all of
retailing, for that matter? –
George Anderson – Moderator
Home-officing has intruded into the practice of entertain-the-kids-with-toys with good impact. Two-income families – coincidentally those which buy the most toys – more frequently have one of their incomes earned from a home-based business or by a home-officed employee. That means more interaction between parents and kids (obviating toys) and less guilt-buying of the latest trendy playthings.
Baseballs and gloves replace X-Boxes. Yahtzee supplants The Legend Of Zelda and Grand Theft Auto. And personal communication means face-to-face instead of text-to-text.
Additionally, media coverage of natural and man-made disasters is teaching our children to think outside themselves. Callow youth is no longer as cocooning. Just as artificial light has been credited with hastening the onset of puberty among female (lengthening our “days” and thereby adjusting our diurnal body chemistries), on-the-spot-right-now coverage of human misery around the globe has increased awareness among our children during their scientifically-proven best learning years.
Here’s hoping that a downturn in toy sales is less about the economy and more about genuine, positive, productive human interaction.
Another factor interwoven with the austere mood of parents regarding the upcoming Holiday season is the amazingly early start many retailers are getting on merchandising. Walgreens and Costco (to name two I have witnessed personally) were already displaying Christmas merchandise in local stores as of Oct. 1. Clearly these two are hoping to catch an early slice of what promises to be limited holiday spending this year. Seems to me, the overlap with Halloween can’t be a good thing for retailers’ overall fortunes.
Yes this Holiday season will be tougher on retailers but how is “tough” measured? Consumers are projected to spend over $3 billion this year on Halloween, which is up 5 percent from 2004. Will consumers cut the budget with energy and fuel prices on the rise? My guess is no. Consumers will continue to stretch their credit card limits just as they have in years past. Even the housing market is showing no significant signs of slowing down. People are stretching their budgets and squeezing into houses using creative financing. What should stop them from splurging on Holiday shopping?
People’s values don’t change unless faced with life-changing traumatic events. First, there was 9/11. Then there were the hurricanes this fall. Add the uncertainty of the economy to the mix. Material goods may not be as important this year as people face the holiday season and an uncertain economy as they reevaluate their lives and their priorities.
Current economic conditions and tragedies aside, one factor keeping consumers away from the retailers is that there haven’t been any real cool new toys introduced. There have no been any recent “Tickle me Elmo’s” that draw they consumer the store. Most of the newer “toys” are technology based and for older children. Toys are one of the largest segment of on-line business, so people will continue to shop there unless properly motivated.
With regards to current economic conditions and tragedies, I think people are beginning to realize that they already have “way too much stuff” that other people don’t have and will be less inclined to overspend this year.
Toy sales are suffering because children spend their time differently, compared to 30 years ago. In 1975 there were no electronic toys, no electronic games, no personal computers, almost no cable TV, no projection or other huge TV’s, no CD players, no MP3 or iPod, no VCR’s or DVD players. Many of these things are not defined as “toys” yet children spend their time using them. Before 1975, the toy business was based on innovation shown by a few new bestsellers, advertised on TV, as well as the bread-and-butter traditional items. Name ten innovative non-electronic best-selling toys marketed in the past 3 years. The major “toy” innovation lately has been in the book business, where children’s books regularly make the best-seller list. When non-electronic toy manufacturers come up with items that capture the imagination, the “toy” business will revive. In the meantime, the growth will come from books and electronics.
In our headlines section today there is a link to a story on the Reading Eagle Web site with one publication’s picks for the top toys of 2005. These are Dora’s Talking Kitchen, Furby, I-Dog, iZ, Pixel Chick, “Shout” Dancing Elmo and VCam Now.
My kids are 5 and 9 and have outgrown the “old fashioned toys” and/or have enough of them to last for years to come. This year we’re cutting way back and plan only one big gift per kid that will be electronic/techy (e.g.. iPod, portable DVD player, flat panel TV, etc.).
If we are indicative of the middle class family (and from polling my friends, I think we are), it will be a tough Christmas for retailers. We’re tired of debt, have paid it all off and are focusing on saving for college, paying for private school and living within our means. Doesn’t matter how much Wal-Mart discounts.
Call me cynical, but those same people we see on TV today saying they aren’t going to buy Tiny Tim that digital crutch he has his eyes on will be the same people we’ll see on TV 12/24 being booked for homicide after killing one of their fellow holiday shoppers to get the last crutch on the shelf.