What’s old is new again! Toy makers have enjoyed strong sales as nostalgic parents remember their own childhood favorites and purchase them for their kids.
By October 2020, sales had climbed 18% year-over-year, driven by classics like Barbie, Legos, Lincoln Logs, Lite-Brite, Hot Wheels, and a host of board games and puzzles.
In contrast to other market segments that have suffered in the pandemic, parents looking for open-ended play options that get their kids off their computers and smart phones are willing to spend on toys to keep them busy.
- Toymakers expect bumper holiday season during pandemic (Oct 27, 2020, Money Talks)
- Classic toys making a comeback this holiday season (Dec 18, 2020, 8 News NOW Las Vegas)
This post is based on the Washington Post article, Mattel forecasts holiday season growth as toy demand surges, by Abha Bhattarai, October 29, 2020; the CNBC article, Mattel forecasts holiday season growth as toy demand surges, by Reuters, October 22, 2020; the New York Magazine article, The Holiday Toys to Buy Before They Sell Out, According to Toy Experts, by Liza Corsillo, December 17, 2020; and the YouTube videos in the Spotlight. Image source: Shutterstock / aastock
1. What forecasting challenges might toy makers be facing due to the surge in demand?
Guidance: Early on in the pandemic, with all but essential businesses shut down and little idea when shopping might return to “normal,” toy makers found it challenging to know what to expect from the 2020 holiday season. It takes time to order and produce games that come from manufacturers in China or other countries, and shipping delays have been common.
Early decisions must be made in order to ensure adequate inventory for holiday shoppers. Aggregate planners for companies like Mattel may have wondered back in March 2020 what the next six to eight months would bring. Little did they imagine that in the fall of 2020, Barbie would post a 29% increase in gross sales, the product’s best performance since 2003!
This would have been hard to predict, with high unemployment rates making some consumers more cautious about spending. However, with less travel and fewer recreational activities taking place with COVID, parents have actually devoted a bit more money to keeping their kids happily occupied at home. Fewer impulse buys of inexpensive $3 to $5 toys have left money available for more meaningful or expensive toy choices.
While toys priced at $20-30 used to be the sweet spot for retailers, now some are reaching out with requests for toys that cost $50. From March to May 2020, during the lockdown, game and puzzle sales increased by 94%. While sales somewhat flattened in summer 2020, as families sought outdoor recreation options, companies expected another big sales boom in December 2020.
2. What distribution issues have toy makers and retailers faced?
Guidance: Most of the production of toys for the U.S. market is outsourced to other countries, with some estimates suggesting more than 80 percent of toys come from China.
Exploding Kittens, a popular family card game, saw demand double from the same time last year, but figuring out when and how much to order from its Chinese manufacturer is challenging. Production delays have been common, and fewer shipping choices make it slower and more expensive to get the game to the U.S. in a timely way.
Overall, companies have found it more difficult to ship products out of China, with fewer planes and boats running, and a shortage of dockworkers to unload cargo on arrival.
In October 2020, MGA Entertainment had more than 400 containers of toys for the holiday season sitting in the Port of Los Angeles. Their containers waited for weeks because of a truck shortage.
These kinds of logistical challenges make it hard to keep shelves stocked and keep toy customers happy for the holiday season.