Changing Times in Toyland Plunging Profits and the Future of Fun Every February the Toy Association Industry holds the world's largest and most important toy trade show. Some of the toys showcased at this event become the hot sellers of the following December, but things just aren't what they used to be in Toyland. The numbers haven't all been crunched yet, but unlike in previous years, no one toy for 2003 has emerged on top. Figuring out what toy will reign supreme in any one season can be elusive. Many factors influence the success of a toy including things such as: play value, advertising, in-store exposure, societal influences and availability. In the end, it is a combination of factors that lead to the success of a hot seller. Measuring the Media It's a fact that media advertising creates unrealistic consumer demand and at times creates a buying frenzy that causes adults to go to incredible lengths to get their child the “in demand” toy of the moment. Colleen McMillan, Communications Manager for the Toy Industry Association (TIA), explains, "It's the parents who buy the toys, but they often do so under the direction of children. Kids are a tough audience and hard to figure out because there are so many influences out there. Take fashion dolls, for example, it's not just about a doll, it's about a lifestyle that is projected through the media...advertising, television and movies." Pam Danziger, President of Unity Marketing agrees. She feels, "Though adults are the buyers of toys, much of the toy business is driven by what's on TV, and that in turn is influenced by how much money is thrown against the advertising. All this can create an artificial phenomenon, a kind of toy craving." Entertainment and Licensing: Other strong influences on the toy industry today are children's entertainment and licensing. It's no secret that kids qualify as big business for advertisers. A recent press release from the Canadian Toy Testing Council stated that the fastest growing advertising trend is the cross-market merchandising of toys with movies, cartoons and television shows. It seems inevitable that when a new movie is released there will be a whole line of toys to go with it. In effect, the advertising campaign is launched for the toys in the guise of a movie. Changing Times One of the biggest societal influences today is the digital revolution. There's no question that technology influences every facet of the development and marketing of toys. The National Retail Federation's spokesperson Ellen Tolley says, "More and more, the toys of today are electronic gadgets. Kids are embracing technology. It's not about Barbies anymore." Children grow up faster than they did 25 years ago. They look more mature and are worldlier at younger and younger ages. One of the most challenging missions of the toy industry is to determine what will capture the attention of today's kids. It has become more difficult to keep kids in the toy aisle after a certain age, as children develop a guise of “mature” tastes at a younger age as they choose cosmetics, clothes and electronics over traditional toys. Child development experts stress that despite appearances, a child is still a child, and a toy that allows kids to discover and explore is the true essence of the toy industry. Shifting Definitions So what then defines a toy? According to Webster, it is, "something for a child to play with." Webster further defines play: "To engage in sport or recreation: frolic, and: to move aimlessly about." Ellen Tolley (NRF) thinks that the definition of a toy has changed. She says, "The new definition for toys is electronic gadgets." Colleen McMillan (TIA) supports her remarks. She says, "Many new toys today have electronic chips. Kids expect to do something with a toy. It has to be interactive." There's no doubt that the technology associated with toys for kids of all ages, tots to teens will continue to evolve. Pam Danziger (Unity Marketing) says, "Kids don't have to learn about technology; they are born into it and view it as a normal part of their every day lives. Toys need to prepare kids for the life they are going to face. Interactive toys are the future of the toy industry and the technology associated with toys will continue to be front and center." Smart Toys: “Smart” toys integrate technology and play combined with learning. Toys like are becoming more and more important within the context of the toy industry. A prime example is LeapPad by LeapFrog. This educational toy designed to help kids read, was the best-selling product during the 2000 holiday season. The element of interactive play connected with a positive outcome of learning is a combination that appeals to both parents and the children who cue their parents’ shopping sprees. Lifestyle Trends: Lifestyle trends are going to influence future trends in toys too. Colleen McMillan (TIA) offers an example when she says, "The Bratz fashion doll targets 'tweens' and is as much about a lifestyle (fashion) trend as it is about playing with dolls." Continuity and Product Loyalty: McMillan also points out that Fisher Price's Hokey Pokey Elmo doll enjoyed a great deal of popularity in 2003, and that for three years in a row a different Elmo has been very popular. This may indicate a trend towards continuity and product loyalty. Traditional Toys: Ellen Trolley (NRF) states, "Even though technology is changing the shape of the toy industry, and electronics are big and will continue to grow, kids still want traditional toys." Colleen McMillan echoes the same idea when she says, "Though the number of toys involving electronics is increasing, it doesn't mean that classic toys won't remain popular. Board games, teddies, red wagons and other traditional toys will always be in demand." The Future of Fun The legendary FAO Schwarz retail chain is stumbling and Toys "R" Us is sinking. So, what's happening to toy retailing? For generations, the old FAO Schwarz functioned as a kind of toy museum, where kids could come and ogle massive teddy bears, thousand-dollar toy cars, and intricate toy train set-ups. Pam Danziger (Unity Marketing) says, "The problem with FAO is that it didn't maintain and live up to its branding strategy. It moved out of its niche luxury market and went mass market by becoming a chain. It's the mass market that crushed FAO." Danziger maintains that there's still a niche for the luxury toy market, and FAO shouldn't have changed its position. Toys “R” Us is a different story, and industry experts don't agree on the reason for the giant retailer's woes. Danziger (Unity Marketing) says, "The shopping experience at Toys "R" Us is crappy, so it's not just about price." Whereas Ellen Tolley (NRF) claims it really is about price. She notes that the NRF's research indicates that people shop on price. "The first thing shoppers consider is price and they are looking for a deal. Consumers are willing to sacrifice customer service and other things to get the best price," says Tolley. In 1998 Wal-Mart overtook Toys "R" Us as the nation's biggest toy seller and industry analysts are indicating that the gap has widened this season. Wal-Mart stores are able to sell toys at rock-bottom prices and make up the profit on other items. Wal-Mart's strategy is simple, spokeswoman Karen Burk said: "We strive to be the low-price leader." In a move that took Toys "R" Us and the rest of the industry by surprise, Wal-Mart cut prices on more than a dozen popular toys in mid-October 2003, a month earlier than normal, further challenging ailing toy retailers. According to Jim Silver, publisher of Toy Wishes magazine, “Wal-Mart’s pricing strategy crated deflation in toy prices, killing profit margins for other retailers.” Data from MasterCard Advisors, a unit of MasterCard International, indicates that toy sales at toy stores slipped 7.7 percent compared with last year. Danziger (Unity Marketing) advises retailers, "You can't compete with Wal-Mart on price. The only way to compete is to add new value." Danziger notes that people shop for emotion, that it's all about experience, and retailers need to create something special. She says, "The trick is to bring the magic of Times Square to the mall." In giving advice for the future she quotes words spoken by hockey super star, Wayne Gretzky: "All the other players skate to where the puck is, but I skate to where the puck is going." Danziger echoes the same concept, "Retailers, need to anticipate where the consumer is going and get there first," she says. Colleen McMillan (TIA) concurs. She feels, "Trends are changing to focus on the shopping experience, not necessarily price. Retailers need to find a niche and offer something different." The Toy Industry Association used to make predictions every February about the next holiday season's hot sellers. But Colleen McMillan says, "We don't make predictions anymore. Things change so quickly it's very hard to predict accurately." Her advice to retailers for the future? "I would emphasize the need for variety. When there are no hot sellers, there is always a need for basic traditional toys that still provide solid play value." Tolley of the National Retail Federation sums it up by cautioning retailers. "In today’s retail environment, predictions for the toys that tomorrow's kids want can't necessarily be made based on what yesterday's kids wanted." •