Photo: @reinasierra via Twenty20
Is the toy category’s pandemic sales boon coming to an end?
U.S. retail sales of toys climbed 16 percent in 2020, according to NPD Group, as parents indulged their kids during the novel coronavirus pandemic. The same research organization, however, sees potential declines looming as the anniversary of the start of the pandemic approaches.
In a blog entry, Juli Lennett, NPD’s VP, industry advisor, toys, wrote that until vaccine adoption is widespread, demand for toys will remain healthy. She wrote, “Children will continue school at home, playdates will be minimal, spend on other entertainment activities will be low, and families will be looking for things to keep themselves and their children occupied and active.”
Declines nonetheless might be seen as the industry anniversaries the sales uptick occurring when lockdowns, school closures and stimulus checks initially arrived. She wrote, “What we can expect is that toy sales will be elevated above 2019 for likely the next six months or more. Because of the elevated sales in 2020, this might be recorded as declines despite the fact that sales will be strong.”
Further ahead, families assured by the vaccine will return to movie theaters, concerts, theme parks and the family vacation. At that point, NPD expects toy spending will return to 2019 levels.
Like others, the toy industry is looking to see whether newly formed routines, such as game night, will continue to boost spending once the pandemic ends.
“2020 ended up seeing extraordinary growth for the industry, which again proved its resilience, highlighted the importance of play and continue to be a strategic category for retailers,” said Mattel’s CEO Ynon Kreiz last week on his company’s fourth-quarter conference call. “The demand driven by COVID, however, is difficult to quantify as the industry was projected to grow even before the pandemic.”
Mr. Kreiz sees certain “search” categories, citing outdoor games, puzzles and building sets, as “more challenged” by tough comparisons.
Brian Goldner, Hasbro’s CEO, believes heightened interest in board games may continue. He told The Wall Street Journal, “We brought in these new families who may have had some prior experience with gaming, but it wasn’t really top of mind. We saw dedicated families certainly bought more deeply too.”
- U.S. Toy Industry Retail Sales Grew 16% in 2020 – NPD
- Metamorphosis – The U.S. Toy Industry Word for 2021 – NPD
- Mattel Reports Fourth Quarter 2020 Financial Results – Mattel
- Mattel, Inc. (MAT) CEO Ynon Kreiz on Q4 2020 Results – Earnings Call Transcript – Mattel /Seeking Alpha
- Hasbro Reports Fourth Quarter and Full-Year 2020 Financial Results – Hasbro
- Hasbro (HAS) Q4 2020 Earnings Call Transcript – Hasbro/The Motley Fool
- Hasbro, Mattel Say Toy Boom to Extend Beyond Covid-19 – The Wall Street Journal
Discussion Questions
DISCUSSION QUESTIONS: Do you see many of the routines involving toys adopted during the pandemic providing enough staying power to elevate the category in the years ahead? How should retailers approach merchandising and marketing toys based on recent developments?
Poll
BrainTrust
Lauren Goldberg
Principal, LSG Marketing Solutions
David Adelman
Founder, The Adelman Group
I see toys and games falling into two separate categories. As long as the vaccine rollout takes, sales of both products should stay strong. Long-term, consumers may discover that “family game night” is a custom worth keeping, even post-pandemic. This should maintain volume of board games, jigsaw puzzles, etc. at higher than pre-pandemic levels.
Toys geared toward keeping kids entertained at home are another matter, especially with the movement to reopen schools sooner rather than later. It’s not hard to imagine sales of toys settling back into their pre-pandemic pattern — still a very large and healthy business.
Like everything else regarding consumer behavior post-pandemic, one guess is as good as another. I don’t know that consumers themselves really know what their behavior is going to be like. But I will say, I think that a large portion of toy and game purchases were about occupying kids who couldn’t go out and play, couldn’t go to school, and couldn’t participate in after school activities. When these activities come back to compete for kids’ time and parents’ share of wallet, the toy category is going to see a corresponding decline in spend. I’m sure that parents would cherish the continued family game night traditions (and maybe some kids would too), but that alone is not going to be enough to sustain the level of spend that occurred in 2020.
Without question we will see a decline in toy sales growth this year, even if sales are still strong. If the category hopes to sustain the gains made with new habits like game night, it is incumbent upon them to get very creative very quickly and to begin rolling out new marketing programs aimed at incentivizing people to continue toy- and game-centric behaviors. It’s time to roll out new or updated products, social media programs, advertising campaigns and promotions that encourage and reward the behaviors that will keep families playing together even after pandemic challenges subside.
Toy retailers must recognize the reasons for the past year’s sales. It wasn’t business as usual. The pandemic won’t last forever, so they must get the right merchandise and the right messaging to their customers as they move away from the “stay-at-home” orders and start to move back to pre-2020 toy habits. That may sound simple – and even like common sense – but if retailers don’t prepare for the swing back to non-pandemic behavior, they will find themselves left behind.
To rephrase the question, we might ask ourselves “when the consumer patterns change and the need to occupy the children’s time indoors changes, what will that behaviour shift to?” I imagine there will ultimately be a drop, albeit a protracted one given that the current pace of the vaccine roll out may start to overlap with the start of the peak season of 2021. I think the shift may be back to more communal *outdoor* games and moreover sports will begin to get back into the fold.
As we move into the next phase of this pandemic, I would expect toy sales to decline, but not at the same rate they accelerated. No one knows for sure what the “new normal” will be, but we can anticipate more family activities throughout the summer that would compete for the share of wallet that was spent in 2020 on toys.
Under normal circumstances, if the toy business grew 4 percent in 2021 the industry would be ecstatic. Using simple math, if the industry grew 20 percent (16 percent plus 4 percent) in 20/21, the industry would be elated. Would an annualized rate of 10 percent be a reasonable forecast? No way! Retailers must look at 2021 carefully. It will not be growth upon growth, but absolute decline.
The kids and the parents are itching to get out. The more time out, the less time for toys, not to mention what is already in the toy chest.
Nikki Baird, you are absolutely on point.
The acceleration of the toy categories is a welcome development and a silver lining of the COVID-19 pandemic. We have seen an increase in smartphone and online gaming over the past few years. With the pandemic’s unfortunate events and with kids having to quarantine in their homes, the rediscovery of the multisensory experiences that toys offer is a great thing.
While the digital commerce levels of 15 percent to 20 percent are not sustainable once the pandemic subsides, we could see a similar downturn of toy sales increases. Toy manufacturers and retailers should tread carefully throughout 2021 and take a conservative outlook into the 3rd and 4th quarters.
At the same time, consumer behaviors have shifted, and we may well see a mini toy renaissance with Gen Z, which values both offline and online experiences.
The Big Box toy store days are over, as witnessed by the demise of Toys “R” Us. Will toy sales surge after COVID-19? I believe the answer depends on what you sell and to whom you sell.
The adage of trying to please everyone but delighting nobody holds true here as well. Millennials are the largest group of parents exploring options today, with Boomers weighing heavily into the mix as their numbers continue to grow as grandparents.
Will the COVID-19 frenzy for puzzles and games stick long after the pandemic is over? I believe to some degree, but as children are heading back to school currently in droves, I see less interest in generic toys as playtime focuses more on supporting education.
For example, toys such as LEGOs, children’s tablets, or even digital books will become more important than more frivolous toys that might only provide an increase in parents’ alone time with children simply occupying time.
Social responsibility, diversity, and sustainability will also play an important role moving into the future with toys. I believe these new overtly conscious consumers will be highly selective moving forward with their children’s toys, focusing on developing skillsets for their kids and not merely entertainment.
There might even be a movement away from calling them “toys” but rather, instead, “instructive toys” or perhaps not even calling them toys at all soon.
All categories lifted by the stay-at-home lifestyle – toys, groceries, alcohol, web cameras, home and lawn care – will remain strong in 2021. Even with ongoing vaccinations it will not be until the second half of the year at best until it becomes safer to return to more traditional forms of work and schooling. And even then a large portion of employees will continue working from home due to convenience, natural acceptance across the society and habits formed over two years. Toys and especially games is one of these categories: families spend more time at home together.
A more interesting question is the metrics. Is YTY KPI a good measure of success? Would benchmarking across channels and competitors make more sense than comparison to prior years? Do you have enough data and granular analytics tools to do it?