Shoppers get a price break in the toy aisle this holiday season

Toy companies such as Mattel Inc. and Hasbro Inc. are managing sales declines and squeezed consumer budgets by giving shoppers a gift this holiday season: discounts.

The COVID-19 boost – including stimulus payments and lockdowns that whipped up toy demand – is waning.

Pandemic-related supply-chain issues have also been resolved, leaving an overstock of inventory that’s put downward pressure on prices.

Consumers have shifted their spending to dining out, concerts and travel after pandemic-era shopping sprees.

In an effort to clear the hurdles, toymakers are slashing prices, with toy promotions during the holiday season expected to peak at 35%, Adobe Analytics data shows.

Companies are also looking beyond the dolls, games and the gift-giving season.

By linking their brands to big-budget films and creating experiences such as opening theme parks, toy companies and retailers aim to capture their share of consumer dollars during the holidays and beyond.

The outlook is bad enough that toymakers are thinking outside the usual holiday strategies to make up the shortfall.

Hasbro announced Dec. 11 that it will cut about 1,100 jobs after lowering its annual revenue forecast in its third-quarter earnings amid demand and inventory challenges.

The headwinds “have proven to be stronger and more persistent than planned,” Chief Executive Officer Chris Cocks said in a memo to employees.

Inflation has moderated substantially from last year’s four-decade high, but this year, Americans have seen an outright decline in toy prices.

They’ve fallen nearly 5% since March to the lowest level on record, according to the Bureau of Labor Statistics.

Overall, the toy industry is expected to have an 8% annual sales decline in 2023, according to Juli Lennett, vice president, U.S. toys industry advisor at Circana, a consumer data analytics company.

Traditionally, the toy industry has weathered economic downturns better than other discretionary sectors because parents prioritize their children’s happiness, said Lindsay Dutch, a retail analyst at Bloomberg Intelligence.

Despite falling prices, however, consumers may still have to buy fewer gifts or spend less on those wish lists as price hikes of recent years have eroded purchasing power.

“You might just get a Barbie doll, instead of a Barbie house this year,” she said.

When shopping for a Christmas gift for her 5-year-old son at FAO Schwarz in New York, Lindsay Canto, a 39-year-old publicist, said prices are the same as other years, but she’s hoping to get something with a 25% to 30% discount.

“That would be ideal for me to purchase,” she said.

Toymakers have acknowledged that shrewd shoppers may delay purchases to closer to the end of the holiday season to get the best deal.

“We are cautiously optimistic about what we are seeing in terms of engagement this season,” said Tim Kilpin, president of toy, licensing and entertainment at Hasbro, in an interview prior to Dec. 11’s layoff announcement.

“It will probably happen late, but we are ready for that,” Kilpin said.

Movies and more

Toy companies are also looking beyond toy sales.

Hasbro held over 500 annual events globally and is opening theme parks, including the launch of Hasbro City in Mexico and a Peppa Pig theme park coming to Dallas in 2024.

Barbie parent Mattel warned in October of slowing demand for the holiday season, taking the shine off its bumper third-quarter results driven by the Barbie movie’s box-office success, with an estimated $125 million benefit to full-year sales.

The company is leaning into its partnership with the Universal movie “Trolls Band Together” and Disney’s film “Wish” to boost sales, CEO Ynon Kreiz said at the Morgan Stanley Global Consumer & Retail Conference in December.

Kreiz also highlighted the price range across its lineup of products, from a Hot Wheels car priced at about $1 to a Barbie collector doll for $500.

“We know that today’s consumers value experiences even more than ever,” David Niggli, chief merchandising officer of FAO Schwarz, said in a statement in response to questions from Bloomberg.

For instance, the 161-year-old toy retailer is dressing workers as toy soldiers “to bring them to life in a theatrical, magical way,” he said.

Kids have also received more sophisticated, pushing toy companies to add digital features even to classic toys.

Lego A/S has partnered with online video game Fortnite to offer digital and physical features for fans to enjoy.

“Consumer preference is a mystery right now,” said Jay Foreman, CEO of Basic Fun! Inc., a company that designs and markets children’s toys and entertainment.

“Retailers are grappling with whether toys are still exciting for consumers, now that we see more electronics take their interest.”

Foreman’s current approach is to focus on classic toys that sell “year in and year out” to better manage inventories. “If the demand turns around, we have it,” he said.