Monday, January 19, 2009

Thoughts About Christmas Past (Three weeks ago)


Christmas is finally behind us even though a few diehard celebrants refuse to remove their twinkling lights and browning evergreen ornaments. But the post mortems on holiday shopping are coming in painting a rather bleak picture of the industry's biggest selling season.

Out of the Hong Kong Toy Show came a statement that "retailers posted a 2% fall in business despite heavy discounts and promotions." ToysRUs posted a 3.4% decline over the nine week holiday season, November 2 - January 3.

Sales -3.4% U.S., -5.1% internationally

And foretelling the sad state of the retail arena right in the middle of the shopping season was KB Toys filing for bankruptcy. (Couldn't they even have waited to see if toy shoppers would beat a path to their mall doors?)
Files bankruptcy in the middle of the selling season!

The ominous signs were everywhere that retailers would use all the tricks to try to be Santa's helpers. ToysR Us boasted of "Our Lowest Prices Ever!" It was common to see an abundance of 50% off or saying it another way, "Buy one at regular price, get a second FREE!" Maybe the best deal was, "all toys at 70% off." But even with the prospect of all those good buys, I was certaiinly not motivated to shop at the retailer who promised an absurd store opening of 4 A.M.! I think I'm a bit of an adventuresome sort, but I couldn't envision myself arising in subfeezing New England darkness to push a shopping cart around Target, TRU, or Kohls. What were they thinking?

Thankfully, in the midst of all the year-end economic gloom. I came across Alan Hassenfeld's optimistic message in the 12/20/08 issue of The Economist magazine, entitled "Santa's Happy Helper." (Check out the full article here.) Alan offered these reassuring words, "The papers say everyone will get coal this year, but most parents - and grandparents - in difficult times will spend less on themselves to ensure that their children are happy, especially in the holiday season. That is an important leg-up toys have on almost all other retail items, except food." Motivated by Alan's comments, I bought my family two bags of groceries, tried to keep one grandson happy with Guitar Hero World Tour, and the Jr. Olympian skiing grandson happy with new downhill skis! (Admittedly, I delayed buying a new Chevy!)

So what can we toy people do to ensure better times in a business where the numbers of 60-70 percent of the T&G annual volume have historically been done in the 4Q? My suggestion for the bailout of our industry is not mounds of cash like all the other businesses bugging Washington's coffers. I propose we petition to alter the official National Calendar for twelve monthly gift-giving dates. Since all the really big sales come AFTER Dec. 25, January should have a specific date to "give the toy or game you didn't give at Christmas." February is almost there already but broaden the 14th beyond "sweethearts" to giving a game or toy "to someone you love" (no XXX items, please!). Now all we need are nine more national proclaimed dates to shop toys and games each month to get those big $$$$ volumes. No, this idea is not intended to in any way dismiss or dilute December 25. We still need Christmas. A monthly gift giving calendar is just the toy industry's way to catch the spirit of economic stimulus packages and hopefully avoid another meltdown like the one our industry experienced in 2008!

P.S. BTW, we know what retailer bucked the sales slide, right?....

Store sales up +1.7%.
"This was a year made for WalMart" to quote Consumer Growth Partners.

CU@Toy Fair!


  1. Hi Ron,

    I'd have to disagree with the idea of multiple sales days. While I do think the push around Christmas creates complications for every industry connected to retail, I think the larger issues to be addressed are in the form of value.

    When a parent purchases a video game system, the game system will typically last for a few years. They can purchase, swap and rent games for it to gain some recurring value. Its an investment.

    When a parent purchases a traditional toy product, how much recurring value will they get out of it? How long until the child wants to try a different toy or game?

    I think the better solution for the industry is to look for better methods of making "investment products". Give the consumer a product that will provide a long term benefit. Consider how many different ways that the consumer can interact with the product, and how purchasable options can be added to significantly change that experience?

    Look at Magic: the Gathering. The Barbie Line. Dungeons and Dragons. Legos. All of these are variations on this core idea, and all of them have enjoyed considerable success and longevity. I think its a mistake to deliberately and directly follow in the footsteps of these successful products (I can point at several unsuccessful clones for each of the products above), but there is still more than ample room for innovation in the market.

  2. Tess Stynes writes in The Wall Street Journal|Tech Section: "Amazon Inc. called its 2008 holiday shopping season "the best ever,""
    Amazon Lauds Its Holiday Sales

    Joseph Pereira writes in The Wall Street Journal|Business : "...many manufacturers have instituted pricing minimums for advertising or sales."
    Why Some Toys Don't Get Discounted

  3. Hi Ron,

    I got a kick out of your cleaver wit, suggesting a tongue in cheek solution to a real problem.

    As we know there are many issues contributing to last year's sagging toy and game sales. Here are a few:
    • The economy: Todays shoppers being more aware, are looking for real value; excitement, sustained interest over time, durability... The idea of "throw away," $9.99 "shut-up" items are quickly becoming a thing of the past.
    • Changing tastes: The shift from static plastic (molecules) to dynamic (bit-driven) video is real– especially if the plastic is trying to be as fantastic as its video competition. Also, Internet, music, cell phone and other gadgets are increasing the competitive pressure. Most kids over 5 want real, not toy look-likes.
    • Lack of innovation: Like the Big 3 who for some reason just cannot seem to make exciting cars any more, toy and game companies seem to have traded in fun-innovation for "smart business deals" which increase their revenues through movie licenses and promotion partnerships with casinos and fast food sellers. The Big Guys are against the wall now. Could recent sagging toy and game sales be the beginning of the pathway to the wall of boring products?

    Great job, Ron. Keep up the good work. I never fail to read your insightful blogs. Keep 'em coming.