DAY 2 – Riding Out the Storm

“Innovation – now more than ever – is critical to riding out the economic storm,” says toy and video games industry analyst Anita Frazier of The NPD Group.

At $22B, toy sales continue to rival spending levels for gaming and home video. Data for the period ending March 31, 2009 stood at $21.5 B in sales and $2.78 B units. 92% of U.S. households purchased toys and the average retail price (ARP) per toy is up, but the number of units sold per household is down. The higher ARP for the year helped offset the decline in the number of units sold. Anita did note, however, that heavy price cutting in Q4 actually took the ARP back down from a peak in the third quarter. Kids’ (ages 2-14) usage of consumer electronic devices has notably increased. The portable/cell phone gaming increases as electronic handheld and tabletop games decline; portable digital media players (PDMPs) saw the largest increase at 31 points increase.

Other than the economy, what’s contributing to the unit sales decline compared to previous years? Are there fewer kids? No. There has been an increase in birthrates in every category through 6-8 comparing 2007 to 2008; and a very slight decrease in the 9-12 category. From the KLT III study, 67% of the kids from age 9-12 are still playing with toys. Anita also reported that 24% of the money spent for kids during the 2008 holiday shopping season was spent on toys, but she saw sales decline for kids ages 3-5. This challenges the data provided by Laura Philips from Walmart during yesterday’s video interview.

Her parting thoughts: after 30 years of tracking toys, it's easy to see through trends that toys have persevered in other difficult times. Following recessions there have been documented periods of growth. Toymakers have a legitimate reason for optimism. Kids of all ages are still playing with toys and still spending on toys.