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Toy costs reached historic lows over the holiday season, and 2023 holds up the possibility of even greater savings for shoppers at the expense of toy retailers.
Despite having a reputation for being recession-proof, the toy business is currently facing a perfect storm of problems, including cash-strapped customers who have less money to spend on non-essential things and a surplus of toys that reached a breaking point last year during the holidays.
Retailers are limiting their toy purchases this year as they are stuck with more toys than they can sell, and manufacturers are producing less toys overall, according to experts.
Toy prices, which typically rise after Black Friday because popular items become scarce, actually declined another 10% through Dec. 23, according Linda Bolton Weiser, an analyst for investment bank DA Davidson.
MGA saw its holiday sales decline by about 10%, the first drop in six years, Larian said.
Some saw the writing on the wall last year and began pushing for smaller, less expensive items that cost under $10 as the holiday season approached. The steep discounting began in early November, or much earlier than usual.
That represents a sharp decline from the previous years, when toy sales increased by 22% and 12% respectively in 2020 and 2021.
Larian remarked that because retailers “purchased so much [during that outbreak], they are sitting on their own inventories.”
According to the most recent data from Adobe Digital Insights, which tracks online sales, the industry had to rely on steep discounts to sell its holiday inventory, reaching a markdown peak of 34% off compared to 19% last year, even though online toy sales increased by 206% from Nov. 1 to Dec. 31 compared to the same period the previous year.
Of all the product categories, toys saw the biggest discounts. According to Adobe, electronics saw the second-highest markdowns, with an average reduction of 25%.
The first half of this year will undoubtedly be difficult and stressful, according to Jay Foreman, CEO of Basic Fun toys in Boca Raton, Florida.
Foreman stated during a recent presentation on the toy market for DA Davidson that the privately held Basic Fun, which manufactures goods like Tonka Trucks and Lite Brite, anticipated sales growth of 15% in 2022 compared to the prior year, but only witnessed an increase of 5%.
Anecdotally, I’d say [the big retailers] will have a little bit more than they had planned for, according to Foreman. “We have a lot of additional inventory now, but we expect it to be gone by the second part of the year,” he said.
The cycle of purchasing toys was thrown off in 2021 when a big number of toys, especially the most sought-after pricey and large products, came after the holiday season had ended, leaving merchants with more inventory than they needed or wanted at the beginning of 2022.
Late deliveries were partially the result of exorbitant shipping costs; manufacturers and retailers balked at paying upwards of $20,000 per shipping container, which increased prices overall.
Since then, shipping costs have dropped significantly, but inventory levels have not.
Joshua Loerzel, a co-owner of Sky Castle Toys, told The Post in the latter part of last year that “it looks like the first week of January in the stores right now.” “Many early price cuts are available that you wouldn’t typically see until shortly after the holidays.”
Manufacturers and merchants are currently exercising caution, according to Larian.
He claimed, “We aren’t producing as much, and they aren’t purchasing as much.”
What do you think of that situation with toys’ abundance? Please let us know in the comments.