As toys get pricier, grown-ups pay up
Michelle Chavez wanted her daughter to open the perfect gift Christmas morning, one that would add a bit of magic to her daughter’s holiday.
So the day after Thanksgiving, she dragged her husband, a MetroLink conductor, to Wal-Mart just in time to buy the store’s last FurReal Friends Butterscotch Pony -- for about $300. Just what their 2 1/2 -year- old told Santa she wanted.
“My kids are spoiled and they get what they want,” said Chavez, a 36-year-old stay-at-home mother who lives in Chino. “I admit that I’m crazy,” she added, laughing.
It’s a good thing she shopped early. Price seemed to be no deterrent for many shoppers looking for a can’t-miss Christmas gift this year. The new breed of feature-filled toys carried price tags that years ago would have scared off even the most adventurous big retailers, let alone consumers.
“It’s going to be the best toy year in five years, and the ability to sell high-priced toys is one reason,” said longtime industry analyst Sean McGowan of Wedbush Morgan Securities in New York. “The success of these items this year has validated the strategy of not avoiding high-priced toys.”
On Toy Wishes magazine’s annual Hot Dozen list, a fairly good predictor of the season’s most popular toys, this year’s average price was more than 66% above the average last year.
Technology seems to make the toys wow-worthy enough to pass the cost-value test that parents implicitly conduct.
“Customers are not concerned about buying a $1,000 plasma TV, so they’re not going to be concerned about spending $150 or $200 on a toy with electronics in it,” said Gerald Storch, Toys R Us Inc.'s chief executive and a former Target Corp. executive. “If it’s worth it, the customer will pay for it, and if it’s not, she won’t.”
Many shoppers indicated that the expensive playthings were worth it.
Butterscotch, the 3-foot-high neighing, chomping, tail-swishing pony from Hasbro Inc. that can hold an 80-pound child, quickly sold out across the country. Ditto the Kid-Tough Digital Camera, a working point-and-shoot device for toddlers, priced at $70, from Mattel Inc.'s Fisher-Price division.
And if you haven’t gotten one already, give up any hope for a $249 Zoombox, a projector for DVDs and video games from Hasbro’s Tiger Electronics, because it’s also long gone from most store shelves.
Toys that do more and cost more aren’t just at the upper end of the price scale.
Products costing less than $20 still take up most of the space on retail toy shelves. But middle-tier playthings have more features and technology and are priced higher than their predecessors.
That’s led to toys such as Mattel’s $55 Dance With Me Barbie, which pirouettes to match a girl’s turns, and Fisher-Price’s $40 T.M.X. Elmo, which repeatedly falls down laughing and gets back up.
Not that long ago, the season’s featured Barbie didn’t cost more than $39.99; for the last 10 years, Elmo listed at $29.99.
Expensive video game systems probably paved the way for parents to throw down a lot of holiday cash for more-traditional toys. But that’s an older phenomenon, McGowan said. What’s happened over the last two years is that parents have been softened up by spending $80 and up on the real must-have item: Apple Computer Inc.'s iPod music player.
What did Chavez’s husband buy for their 9-year-old daughter? A $156 iPod Nano.
“The toy industry has been so obsessed with saying, ‘Eighty percent of my product line is available for under $20,” McGowan said.
“They’ve watched consumers lay out tons of money for other products that are not toys -- iPods, digital cameras, video cameras, and they finally said, ‘Our problem isn’t the price, it’s the fun,” he said. “If we can’t deliver the fun at $20, let’s deliver it at $30 or $40.”
There’s also the gift-card factor. Parents and children add their own money to the value of a gift card -- anywhere from 5% to 75%, experts say -- which enables them to trade up from what they would have spent on a single item.
In other cases, they combine cards from birthdays and holidays to buy a more expensive item.
Still, manufacturers said they thought long and hard before presenting their highest-priced products.
That $300 pony?
“That was a stretch even for me,” said Sharon John, a Hasbro general manager. “But we did a lot of testing on it to ensure not only that the product was robust but that from a parental perspective it was within reason.”
The decline in technology costs, oddly enough, fueled the rise in toy prices. That’s because many toys that would have cost several hundred dollars a few years ago -- and therefore would have been impractical for most retailers even now -- sell for just over $100 today.
Theresa Gonsalez, 52, and Antonieta Ventura, 57, a janitor and a housekeeper, respectively, split the $150 cost of a shiny red TV/DVD combination system styled like Lightning McQueen of the animated film “Cars.”
It was a gift the Los Angeles residents bought at Target and planned to give their 2-year-old grandson.
“We’re working,” Gonsalez said. “It’s not a lot of money.”
Toy makers’ willingness to compete for the premier spot under the tree is a sharp shift. Not too long ago, traditional thinking in the $22-billion U.S. toy industry was to keep products under the $19.99 threshold.
As recently as three years ago, toys priced at $29.99 and $39.99 -- let alone more -- weren’t considered mass-market items, said Mattel Brands President Neil Friedman.
“They weren’t big volume, certainly, as they are today,” Friedman said. “This was the first year that $39.99 has done well.”
This season, thousands of consumers were willing to pay even more to get the toys they wanted.
In the two weeks that ended last Monday, online auction site EBay logged more than 34,400 sales of T.M.X. Elmo at an average price of $51.23 -- 28% above the manufacturer’s suggested price. During the same period, 791 shoppers bought a Butterscotch pony for an average of $342.38, or about 14% above most stores’ top price.
The first price increases came about less by design than by necessity. A few years ago, a cost increase in resin used to make plastic toys prompted retailers and manufacturers to boost prices just past the traditional top price for most toys of $19.99. To retailers’ surprise, parents didn’t balk.
“Once you’re at $21.62, why not be at $24.99 -- you’ve already crossed the big barrier, so they went to these higher prices and they got it,” McGowan said. “So they said, ‘Maybe we’ve been leaving a lot of money on the table.”
Still, the prices can be jarring. One look at the $200 tag on the Robosapien V2 robot toy from WowWee Ltd. was enough to turn off J.C. Santiago, a 34-year-old maintenance supervisor and father of two boys.
“I wasn’t raised that way,” Santiago said. “Most of the things they offer you, you don’t really need.”
The toy and retail industries say they also are benefiting from older parents. As Americans -- particularly better-educated, higher-income workers -- increasingly wait to start families, more children are born to financially comfortable couples.
And more parents, regardless of income, are more willing to spend on their kids.
Peter Yun, a 42-year-old construction worker from Los Angeles, bought his 3 1/2 -year-old son an $80 radio-controlled Hummer made by Nikko America Inc., with digital proportional steering, rear-wheel differential gear and off-road tires. The toy is recommended for children 8 and older.
“It is a little too much, but I promised him,” Yun said. “I don’t make that much money, but I save it for the kids.”
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Hot toys, hot prices
The season’s hottest toys cost an average of 67% more this year, reflecting added features and technology. The higher costs haven’t stopped these toys from flying off shelves.
*--* Approx. Toy Maker Age price Barbie and 12 Dancing Mattel 3 years + $24.99(per doll) Princesses Bratz Forever Diamondz MGA Ent. 6+ $29.99 FurReal Friends Hasbro 4+ $299.99 Butterscotch Pony Digi Makeover Radica 8+ $59.99 Fly Wheels XPV Jakks Pacific 8+ $59.99 Kid-Tough Digi. Cam. Fisher-Price 3+ $69.99 Lego Mindstorms NXT Lego 10+ $249.99 Magtastik Mega Brands 3+ $29.99 (starter set) Monopoly Here & Now Hasbro 8+ $29.99 Speed Stacks Stackpack Play Along 4+ $39.99 T.M.X. Elmo Fisher-Price 18 mo.+ $39.99 Wii Nintendo 6 years+ $250.00
Sources: Toy Wishes magazine, Times research