It’s Not All Child’s Play at Toy Fair

Hope springs eternal at the Toy Fair, the trade show that draws thousands of buyers in search of the hottest new items to put under next season’s Christmas tree.

Hope and a bit of luck are exactly what the industry needs this year after a decidedly lackluster 2002, which failed to produce a marquee toy like the Cabbage Patch Kids or Furby to ignite the market.

As the economy drifts and retailers stumble, this year toy buyers at the American International Toy Fair are more anxious than ever to see what’s new for the all-important holiday season.

“The best thing about the toy industry is also the worst thing: The best thing is you get to start over every year. The worst thing is you often have to,” said Sean McGowen, a toy analyst at Gerard Klauer Mattison.

Among the candidates for the “next big thing” are Barbie of Swan Lake, a poster-thin telephone to hang on the wall and a battery-operated dog.

The show -- 100th anniversary of the Toy Fair -- opens in New York this weekend.

Toys are a $20-billion to $25-billion industry, according to preliminary data from NPD Group, a market information firm. The toy business has grown in recent years, but is facing competition from the $10-billion video game industry, up from $6.5 billion just three years ago.

“Toys is a fairly recession-proof category,” NPD Group communications director Reyne Rice said. “People still buy for their kids even if they give something up for themselves.”

At the first Toy Fair in 1903, there were fewer than 10 toy companies taking part and Lionel trains were among the featured items.

Now, in a typical year there are about 1,350 companies exhibiting at New York’s cavernous Javits Center and 250 official exhibitors in the Toy District showrooms, with as many as 20,000 buyers coming to see the wares.

Exhibitors ranging from mega-manufacturers such as El Segundo-based Mattel Inc. and Pawtucket, R.I.-based Hasbro Inc. to tiny entrepreneurs come to show their wares at Toy Fair. Although the fair won’t necessarily make or break a company, it can serve to create buzz.

This year, Mattel, the No. 1 U.S. toy maker, is showing Barbie of Swan Lake, successor to the wildly popular Nutcracker Barbie and Rapunzel Barbie. Its Fisher-Price unit is debuting an entry into the rapidly growing educational toys segment PowerTouch learning system as well as an Elmo doll that dances the hokey pokey.

No. 2 toy maker Hasbro will be showing a ThinTronix radio and telephone and a canine version of its FurReal Friends cat, one of the few holiday favorites in 2002. It is also updating classics such as My Little Pony, Easy-Bake Oven and the game of Twister, which was first introduced in 1966.

But if toys are supposed to be fun, no one in the industry is laughing. Business is tough this year as the possibility of a war and economic concerns intensify the cutthroat competition among toy retailers.

Wal-Mart Stores Inc. -- the biggest U.S. toy seller -- and other discount stores such as Target Corp. and Kmart Corp., which has filed for bankruptcy protection, are able to use toys as a loss leader, luring shoppers with low prices and making money with other merchandise. Because many toy offerings are the same no matter where you shop, cash-strapped consumers flock to the lowest price.

This is a problem for specialty toy retailers. Last month, hurt by weak sales and stiff competition, FAO Inc., parent of posh toy seller FAO Schwarz, filed for Chapter 11 bankruptcy protection. And on the heels of disappointing holiday sales, Toys R Us Inc., the nation’s biggest toy retail chain, announced plans to cut 700 management and supervisory jobs, using the money saved to boost training of salespeople and focus on customer service.

“It’s essentially a no-growth business with high concentration among a few retailers and high concentration among a few manufacturers,” analyst McGowen said. “It’s hard for small companies to get in there and it’s hard for big companies to grow.”