The toy industry is facing some headwinds this year.
How’s that for cutting right to the chase?
As we closed the books on 2023 and started a fresh one for 2024, much uncertainty remains due to a variety of un-fun factors that need to be addressed quickly and in a collaborative way.
In a world where numbers matter, and analysts and pundits (including this one) weigh in on what was and what could be, the biggest hangup I still see from the Wall St. crowd is that the industry is down when compared to the explosive growth seen during 2020, 2021, and the first half of 2022. Of course, it is, and as I’ve said before, to expect that the pandemic-skewed sales numbers would be sustainable was foolish. Despite the back-patting by certain players in the business, the toy industry was the unlikely beneficiary of factors outside of its control and the right moves were capitalized on at the time. And lest we forget all of the “free money” doled out by the U.S. government for a while — cash that was quickly spent on toys and games that are still filling playrooms and closets.
We can’t dwell on the past, but we should enjoy the knowledge and experience gained in recent years.
How did the U.S. toy industry perform in 2023?
Right now, the numbers are still being tallied but next month’s issue of The Toy Book will feature a deep-dive on retail numbers from throughout North America along with our annual recap and predictions from Circana.
One bright spot is that fresh data from the CNBC/NRF Retail Monitor reflects strength at retail during the holiday season.
Total U.S. retail sales (excluding automobiles and gas) spiked 3.07% unadjusted year-over-year in December following 4.24% year-over-year growth in November. According to the Retail Monitor, total retail sales for all of 2023 spiked 5.32% over 2022.
December’s numbers combined with November’s results show retailers had a very successful two-month holiday season. Clearly, retailers got it right this holiday season, providing consumers with what they wanted, options on when and where to make their purchases, and with prices customers were comfortable paying. These advance insights from the CNBC/NRF Retail Monitor give everyone who follows the retail industry a jumpstart on government data that won’t come out for another week.”
Just yesterday, NRF Chief Economist Jack Kleinhenz cautioned that despite the threatened recession never happening, the tailwinds of continued consumer spending in the face of inflation and higher borrowing costs “are not necessarily sustainable.”
Shay says that retailers “got it right” overall, but did they in toys? I’m not so sure about that, particularly at mass.
Refocusing on core retail fundamentals
As a former merchant and retailer, I’m obsessed with physical retail and improving the consumer experience, which, in turn, results in positive sales growth for retailers and suppliers. Frankly, the mass retail toy department experience in 2023 was dismal in the U.S. And there is a reason why I specifically point to domestic retailers: Have you seen what their international counterparts are doing? In Latin America, Europe, the Middle East, India, and throughout Asia, there are shining examples of superb presentation!
Mass retail toy departments in the U.S. are boring, and in most cases, poorly stocked and maintained (they’re a mess). It’s as if the core fundamentals of retail have been lost somewhere between the home office and store level. As the saying goes, “You can’t sell an empty shelf or peg hook.” Even worse? When the product is in the building and is collecting dust in a stockroom.
I’ll stop short of calling out names, but we all know who they are.
Sans the occasional pallet train or special display, there is nothing to engage parents, kids, gift-givers, or anyone else shopping for toys at mass retail in the U.S.
This is where specialty wins, and why so many independent stores have seen a resurgence in recent years. They care. They know the product. And it shows.
In the meantime, the value channel — where visual chaos is hardwired into the DNA of the business under the guise of a “treasure hunt” — had a feast with the delicious scraps leftover from shipping issues, the diversion of canceled orders, and the simple factor of “too much stuff” during the holiday season.
Shoppers at Ollie’s, Burlington, TJ Maxx, Marshalls, Ross Dress For Less, and others were treated to top-level, name-brand toys and games for pennies on the dollar with shipments rolling in right up until Christmas. In my store visits, it was not uncommon to find $30 toys for $3.99-5.99 by the caseload, and I’m sure that resulted in some very happy kids and families.
While the headwinds of 2024 are many, it’s important to focus on the things that can be controlled. While we can’t stop drone strikes along trade routes, social unrest, or war (time to call G.I. Joe), retailers and toymakers can work together to rethink the consumer experience and bring the magic back.
And toy retail in Canada? A topic for another time.
