The Toy Market: Where Is It Going This Year? by Lutz Muller
B
ob Eckert, then CEO of Mattel, told analysts back in 2008, “As I’ve said during past times of high anxiety, my bet is there will be a Christmas.” This will hold true again this year, but it is probably the only thing that will not change.
The Consumer Migrates Down the Price Scale The recession that set in late 2008 had two major consequences. One was that unemployment began to soar
$59
11
$58
10
$57
9
$56
8
$55
7
$54
6
$53
5
$52
4
$51
3
$50
2
Seasonally Adjusted Unemployment Rate
12
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$60
Apr. 2000 Oct. 2000 Apr. 2001 Oct. 2001 Apr. 2002 Oct. 2002 Apr. 2003 Oct. 2003 Apr. 2004 Oct. 2004 Apr. 2005 Oct. 2005 Apr. 2006 Oct. 2006 Apr. 2007 Oct. 2007 Apr. 2008 Oct. 2008 Apr. 2009 Oct. 2009 Apr. 2010 Oct. 2010 Apr. 2011 Oct. 2011 Apr. 2012 Oct. 2012 Apr. 2013 Oct. 2013
MEDIAN HOUSEHOLD INCOME IN THOUSANDS (OCTOBER 2013, SEASONALLY ADJUSTED)
Median Household Income and Unemployment Rate January 2000 to October 2013
MONTH AND YEAR Recessionary Period
Median Household Income (left)
Unemployment Rate (right)
and median household income fell off a cliff a year later. When household income falls, consumers face choices. They can either maintain their living standards and go into debt, or they can cut back on expenses. More than half of U.S. wage earners make less than $30,000 per year and the unemployed make even less—both, typically, are already maxed out in debt. So the first option is not a realistic one, which leaves the second one: cut back. On July 28, Nielsen reported “Intentions to spend are at the highest level in the U.S. since before the Great Recession (49 percent), but 62 percent of Americans continue to deploy strategies to save on food, entertainment, and household expenses.” The shopfloor people at the Klosters Toy Retailer Panel have observed an accelerating trend toward substitution— consumers either go down the price scale for a given range or they seek another lower-priced brand. The most extreme example for this is preschool, where Fisher-Price, the leader in the category, has seen sales decline compared to the preschool category overall, as seen in the chart on the next page. Fisher-Price is not only the leader in the category, it also typically has the highest price points, and preschool toys— particularly for the very young—are very readily substitutable. Young children, especially kids ages 3 and under, do not really care whether they get a toy that costs $100 or $5 as long as they get one with which they can play for a bit before proceeding to the real fun—playing with the pretty box, the ribbons, and the wrapping paper. This trend toward substitution is certain to continue for
Source: John Coder and Gordon Greene, Sentier Research Annapolis 2013
28 • THE TOY BOOK
SEPTEMBER/OCTOBER 2014