Hot Toy Or Not? Now Is When The Toy Game Gets Serious

The Toys R Us float in this year’s Macy’s Thanksgiving Day Parade, Geoffrey’s Dazzling Dance Party, … [+] is expected to drive sales in the 451 Macy’s stores that have added Toys R Us toy shops. (Photo by Eugene Gologursky/Getty Images for Macy’s Inc.)

Getty Images for Macy’s Inc.

For toy manufacturers and toy retailers, their make-or-break season begins this week.

The holiday game they’ve been prepping for since last year is about to get real with the start of the Thanksgiving, Black Friday, and Cyber Monday sales.

While the toy industry has become less dependent on the fourth quarter over the past decade, the holiday season still is the main event.

Over 300 toys have been picked as hot holiday toys by the leading toy retailers, according to an analysis published by consulting firm Global Toy Experts. But starting this week, shoppers which have the main vote on which toys are hot, or not.

After two pandemic Christmases and supply chain shortages that pushed parents to shop earlier, and to shop online, this year is feeling more like the old days, when the winners and losers of the toy world will be decided in the final weeks of December.

And more of the toy battles could be fought the old-fashioned way, in stores, and in-person shopping.

“The biggest takeaway for this holiday season, if we were to put one word on it, is traditional,” said James Zahn, editor-in-chief of The Toy Book.

“Families are going back out to stores. There is a surge in department store shopping, as we’re seeing with the Macy’s and Toys R Us partnership. And the ads and promotional campaigns – buy one, get one, 50% off – it just feels like a traditional holiday season – a little more old-school and less digital,” Zahn said.

The mood among toy manufacturers is mixed heading into the season, Zahn said. It seems, he said, that half are worried about the impact of inflation, while the other half see little reason for concern. Zahn said he has seen that split forecast from the largest manufacturers to the smallest.

“Chris Cox at HasbroHAS
said they were seeing the inflationary pinch hitting their customers, while Ynon Kreiz at MattelMAT
said a week later they see no meaningful impact whatsoever on their consumer habits,” Zahn said, referring to the toy CEOs recent earnings calls.

“I’ve spoken to a number of smaller companies over the past few weeks and it’s the same thing,” he said. “Either there are no signs at all that demand is slipping, or people say that they’re feeling it. It is two complete opposites with no middle ground,” he said.

Another difference this year is that unlike the previous years when supply chain problems made it harder to keep toys in stock, many retailers now appear to have extra inventory they want to get rid of.

Zahn said that within the past week he has started hearing from retailers that they are planning to do deep discounting beginning Thanksgiving.

“And it’s not just the Walmart, Target, Amazons of the world,” he said. “We’re starting to see some of the warehouse clubs get into it, and digital retailers as well.”

Market research firm The NPD Group reported last week that toy sales continued to be strong heading into the holiday season, after dramatic growth in 2020 and 2021. U.S. toy sales revenue was up 4% in the third quarter of this year, according to The NPD Group.

Higher toy prices appear to be driving much of the revenue growth, however. The average sales price increased by 3% and unit sales only increased by 1%, according to NPD. For January through September, unit sales declined by 3%, while the average selling price increased 6%, NPD reported.

Squishmallows, a popular item by Jazwares, contributed to a 27% growth spike in the plush category … [+] during the third quarter and are expected to be holiday bestsellers. (Photo by James Manning/PA Images via Getty Images)

PA Images via Getty Images

Coresight Research, in its Countdown to Holiday 2022: Hottest Toys report, said it is expecting a strong increase in toy spending this holiday season, despite inflation. A consumer survey by Coresight Research found that 40.5% of U.S. holiday shoppers plan to buy toys or games as gifts this year, and that 26.8% of them expect to spend more on toys and games this year.

The Coresight Research report also looks at the hot toy lists created by the leading toy retailers, AmazonAMZN
, WalmartWMT
, and TargetTGT
, and this year, the Macy’s/Toys R Us partnership, for clues as to which toys will be top sellers.

Global Toy Experts which has been publishing an analysis of the hot toy lists since 2019, believes the lists are a leading indicator of how we can expect toy companies and retailers to fare during the fourth quarter.

A key finding in this year’s analysis of the lists was that Walmart, Target, and Amazon are all betting that parents will be more cautious about spending this year, Global Toy Experts CEO Richard Gottlieb said.

All three retailers reduced the number of higher-priced toys on their lists this year, causing the market basket value of each retailer’s list to drop by double digits.

Gottlieb, however, doesn’t believe inflation will impact most parents’ holiday toy buying decisions.

“To me, a parent will buy a toy no matter what,” he said. Even if inflation causes them to reduce other spending, a holiday toy gift for a child “is the last thing they cut back on,” he said.

Gottlieb noted that in good times and bad times, the change in sales year over year typically falls within a tight range, between down 2% and up 2%. This year, after factoring out inflation, he expects results to again fall within that range.

The Global Toy Experts analysis also looks at which toy companies received the most mentions on the hot toy lists of Amazon, Walmart, Target, and the new Macy’s/Toys R Us partnership, as well as United Kingdom retailers Hamleys and Smyths.

The winners in terms of number of products that made hot toy lists were Mattel, Hasbro, MGA Entertainment and Lego.

The toys that appear on most hot lists typically reflect toys the retail buyer believes will sell well, but also the amount of advertising and promotional support the toy manufacturer will put behind it, a consideration that favors the deep-pocketed giant toymakers, Gottlieb said.

Zahn noted that Amazon calls its toy list the “Toys We Love” list, rather than a hot toy list, and that this year it includes older product from previous seasons, not just the latest holiday releases, a sign that Amazon is looking to move over-stocked inventory.

While Zahn said there are a number of toys that could sell out early this year, and be hard to find for Christmas, he said it is a pretty safe bet that no toy will trigger a Tickle Me Elmo or Cabbage Patch doll frenzy this year.

“My personal take is that as a society we’ve moved on from the singular must-have holiday toy,” he said. “Cabbage Patch, Tickle Me Elmo, those were toys that it felt like every boy and girl had to have. We don’t see that anymore because we haven’t seen a toy that bridges all interest for all kids in quite a long time.”

Gottlieb

Hot Toys –

Source: https://www.forbes.com/sites/joanverdon/2022/11/21/hot-toy-or-not-now-is-when-the-toy-game-gets-serious/