This column was originally published in the 2022 Innovation & STEM issue of The Toy Book. Click here to read the full issue! Want to receive The Toy Book in print? Click here for subscription options!
Mixed messages signal reflections of the same reality this holiday season.
It’s mid-November as I write this, and the toy industry and its partners are officially crossing into the back half of the fourth quarter. The holiday season is in full effect, and early indicators point to strong consumer demand.
According to the National Retail Federation’s latest forecast, retail sales in the U.S. should grow between 6% and 8% over last year during the tracked November/December holiday season.
In the toy department, inflation remains a big concern, but Q3 toy industry earnings proved that, for the most part, consumers continue to open their wallets for a great toy or game.
Still, there is a metric that I keep getting hung up on, and it’s stuck with me since The NPD Group’s Juli Lennett called attention to it in the February issue of The Toy Book: The increase in average selling price (ASP) over the past three years is fueling total industry dollar growth by offsetting fewer unit sales.
Compared to 2019 pre-pandemic levels, total dollar sales for the global toy industry are up 30% year-to-date through September, but overall unit sales dipped 4%, offset by an ASP increase, per NPD. By last month, both families and corporations settled into the same reality — the dollar just isn’t going as far as it used to.
On its Q3 earnings call, Hasbro CEO Chris Cocks said that a 15% decline in revenue was “impacted by increasing price sensitivity for the average consumer.”
Just a week later, Mattel CEO Ynon Kreiz noted that price increases implemented across the board had not resulted in any “meaningful impact on consumer demand” for his company as net sales remained essentially flat when compared to last year.
As earnings season closed out earlier this month, the contrast continued with record numbers from Jakks Pacific and a revenue decline for Spin Master. But no one expected the shocking duality that was about to pop at Funko.
In Q3, despite a 36.6% spike in net sales, double-digit growth across all categories and regions, and several successful new product launches, growing pains hit the company’s balance sheet. With a 40.6% increase in debt over last year and a spike in on-hand inventory as retailers pull back in Q4, revised guidance for slowing growth and shrinking profit sent investors into a panic, resulting in the company’s share price dropping by more than 50% in just 24 hours.
But the toy business is a roller coaster, and what goes up will come down, swing around the corner, hit a corkscrew, and rise to great heights again.
As the industry charges forward, 2023 is poised to deliver one of the freshest lineups of new toys, games, and related products in recent years. Embracing newness and sparking curiosity is at the heart of our Innovation & STEM issue.
Senior Editor Madeleine Buckley offers an update on The STEM Generation on page 24, followed by a showcase of hot new products joining the category in the months ahead.
At Chicago’s Radio Flyer, designers are reinventing the wheels, and on page 34 we take a deep dive into the company’s evolution and focus on a new category for growth: electric vehicles and ride-ons.
Elsewhere in this issue, we rev up the fun and pop the hood on some new models in the vehicles and R/C showroom (page 36) and shine a spotlight on emerging products that are planting roots in the world of eco-friendly toys (page 42).
Flip to page 48 to catch up with the leaders of McFarlane Toys, Basic Fun!, The Loyal Subjects, and Super7 with some insight on the innovation (or lack thereof) in the collectibles space.
For our cover story (page 32), we discover how Just Play found its way to Sesame Street and we learn the ABCs and 123s of how the toymaker plans to innovate on a brand that’s been a staple in preschoolers’ toy boxes for decades.
Of course, we can’t celebrate the holidays without thinking of a great toy store experience to “wow” families. On page 46, Senior Editor Jackie Cucco spins the tale of retailer Frederick August Otto Schwarz and explores how his namesake store is celebrating 160 years of wonder with new initiatives and a big partnership with Target.
This issue is also packed with the usual departments and insight you’d expect, including a look at designing seasonal packaging in Outside the Box; a Stat Shot from The NPD Group; an update on diversity and inclusion from GPI; the latest news from The Toy Association and the American Specialty Toy Retailing Association (ASTRA), and more.
Our team is already hard at work on the 2023 edition of The BIG Toy Book. If you’d like to be involved, drop me a note, and let’s be ready to rock the new year in a big way! We offer you warm wishes for much success this holiday season! »
