CHRISTMAS 2020: HERE’S WHY TOY SALES WILL SEE THE USUAL SEASONAL SALES SPIKE
As much of the world is still hunkering in coronavirus inflicted lockdown ,we’re starting to finally see the light at the end of the tunnel in terms of some easing of restrictions and businesses around the world either opening up again or at least seeing a timeline for how they can open up again.
The remaining issue though which won’t pass as quickly as this horrible (and hopefully only) wave of coronavirus is the economic damage inflicted across the world. Businesses have failed and will continue to fail throughout at least the next 12 months due to the direct impact of the pandemic lockdown or due to the hangover from it. Many millions of people have lost their jobs, many millions more are officially furloughed but facing an uncertain future.
None of which is uplifting of course, but there should be some light ahead for toy companies for a number of reasons:
1. The economy will pick up – while there is no doubt the global economy has taken a big blow, this downturn was not caused by some fundamental structural factor, it was caused by a hitherto unprecedented shutting down of society and economy. When people can come out again, as long as the coronavirus stays largely away, things will pick up again. It will take time, but this is not a massive physical destruction of economic drivers like we saw coming out of World War 2. The buildings are still there, planes are still on the tarmac and so while it may regrettably be a different company or different people operating the bars, restaurants and plans they have not physically disappeared. 2020 is bound to be a tough year, but hopefully 2021 can see a return to normal. The global population is still growing, and while we may see some changes in consumption and travel habits, the underlying factors driving economic growth are still there for the mid-term thankfully.
2. The Toy business is recession resistant – it’s an often-quoted cliché, but the toy business tends to do ok in tough times economically speaking. The global financial crisis of the late noughties did not kill the toy business. Parents did not stop spending at Christmas because times were tough, history shows that the tougher the times the less likely parents are to skimp on giving their kids presents. When things are difficult human beings tend to see greater value and security in golden family occasions like Thanksgiving and Christmas. While there is always a first time, we have not seen a financial crisis bad enough to stop the usual buying and consumption patterns in Q4 of the year. There is no reason to believe this will suddenly change for Christmas 2020. It is likely that many people will struggle to find work and that some industries and businesses will not make it through this crisis quite like they were before, but nevertheless people are very resourceful and at this stage (May 2020) Christmas is quite a long time away. The issue is more likely to be one of stock commitments as toy companies and retailers can become risk averse during difficult times.
3. The reasons why parents buy toys have not disappeared – arguably the reasons for parents buying their children toys have got stronger in some ways. Increasingly parents are seeing toys as an antidote to excessive screen time, in effect they are desperately trying to leverage their kids off screens by buying them toys. Bearing in mind how big a thing screen time addition is for kids these days, this modern-day fundamental driver is not going away. Sales of parentally approved toys like board games, puzzles and science kits have soared during lockdown, but 6 months is a long time. Consumers will mostly have long since forgotten what they bought in March an April by the time November rolls around. These ‘worthy’ toy products are seen by parents as helping their kids’ development, so why would that suddenly stop when the shops are full of such products for Christmas? We should also remember the massive impact that the ‘playground effect’ can have on sales of toys, and while many children in North America and Europe will miss school until after the summer holidays in some cases, they are still likely to return en masse to school in the autumn. Therefore, we can predict a massive upsurge in kids re-uniting with their strongest social influencers which may seem a late boom in pocket money toys for the back end of the year.
4. Food retailers will have a greater share of the toy market coming out of the pandemic – the retailers most likely to come out of lockdown stronger are food retailers, because their businesses have remained largely open. While they may have seen a dip in non-food sales and therefore in profits during the lockdown, they will nearly all be trading still towards Christmas when the normal pattern of shoppers going to buy groceries but then buying additional often high ticket Christmas presents returns.
5. There should be more toy marketing money on the table heading into Christmas – anyone planning so spend marketing money in Q1 or Q2 will have most likely done everything they can to either stop the planned campaigns to preserve cash or switched them to more parentally approved products which have sold well through this period. Also, for those companies who had products based on movie licenses, it is quite likely that those items did not get delivered to market or if they did without full marketing commitment as the movies did not come out in the cinema. For these reasons there should be plenty of marketing money available to promote products coming out late in Q3 & Q4 this year.
There is no doubt we are heading into a significant economic downturn, but we suggest it should not have massive effect on toy sell through this Christmas. As long as toy companies and retailers order enough stock, we think demand will exist – hopefully demand this demand can be met.
We run a Consultancy business advising toy companies on how to grow their business by a combination of strategic analysis and export sales facilitation. We have helped more than 100 toy and game companies grow. For more information on our process and methodology for growing toy sales: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/