Toy Retailers Are Bracing for Tough Holiday Season
Francie Todd’s two boys may not notice it, but there will be fewer toys under the tree this Christmas.
Amid higher gasoline prices and other effects of Hurricane Katrina, Todd plans to cut her toy spending in half.
“You look at the economic climate overall, and this is not a good time to run up the credit cards,” said Todd of East Lansing, Mich., who planned to spend about $100 on toys for each child, down from $200 last year.
The human suffering from Katrina also has made Todd reevaluate her budget for toys. “We want to be more about the experience of giving, and less about the getting,” she said.
Those sentiments, likely to be shared by millions of parents this holiday season, are a depressing turn for the $20-billion toy industry. If parents buy one or two fewer toys each, the collective frugality could give the industry its third straight year of falling holiday sales.
Toy retailers, preparing for a difficult season, plan big discounts and other promotions.
“It’s going to be extremely competitive to draw customers to their stores,” said Jim Silver, editor in chief of Toy Wishes, a trade publication.
Price wars are already underway. Wal-Mart Stores Inc. began by slashing prices as much as 30% on toys including the latest version of Hasbro Inc.’s electronic pet Furby and Fisher-Price’s “Shout” Dancing Elmo. Toys R Us Inc. responded by lowering its prices.
Wal-Mart, hurt last year when it didn’t offer enough discounts, is expected to mark down more aggressively this year. Toys R Us, meanwhile, is offering more exclusive toys than it did last year, and other retailers also are ready for a battle to get customers into the store.
“We will absolutely be competitive with Wal-Mart this holiday season,” said Lena Michaud, a spokeswoman at Target Corp., who declined to elaborate.
But price competition from discounters is just part of the problem -- the toy industry needs some big hits this holiday season to make children want more toys. After suffering overall sales declines of 3% in both 2003 and 2004, toy companies have already seen sales of traditional toys -- dolls, games and action figures, for example -- drop 5% from January through August, according to NPD Group Inc., a market research firm in Port Washington, N.Y.
What’s hurting traditional toy sales is that children are growing out of toys at a younger age and are more interested in trendy clothing and gadgets such as digital music players. Meanwhile, the uncertain economy, particularly higher gasoline prices, has made parents more conservative when it comes to toy shopping, Silver said.
Still, plenty of toys have caught parents’ notice this year. Toys related to the latest “Star Wars” and the “Batman” movies, such as Darth Vader helmets from Hasbro and the Batmobile from Mattel Inc., have done well, as have new versions of retro toys from the 1990s such as Play Along Inc.’s Sky Dancers and electronic learning products such as LeapFrog Enterprises Inc.’s Leapster.
For the holidays, the toy industry has high hopes for a series of children-friendly versions of adult gadgets, including VCamNow, a $79.99 video camera for 8-year-olds, and ChatNow, a $74.99 pair of two-way radio communicators, both from Hasbro.
“We are living in a gadget-driven world, and kids want their own gadgets,” said Chris Byrne, a New York-based independent toy consultant. “It makes them feel like they’re part of the whole culture.”
